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Understanding workers' compensation insurance

Insurance coverage is a critical protection. Insurance types include auto insurance, health insurance, and homeowner’s insurance. However, workers’ compensation provides financial compensation to policyholders when a covered “event” occurs while an employee is performing job duties. For auto insurance, a covered event might be a collision or a damaged vehicle; for health insurance, covered events usually include surgeries, medications, and doctor’s visits. For workers’ compensation insurance, the only covered events occur at work or as the result of an employee doing work-related duties.

Workers’ compensation insurance is unique because business owners purchase policies on the behalf of employees. However, having a safer workplace and fewer injuries or illnesses at work can result in fewer workers’ compensation claims, benefiting both business owners and employees alike.

The business owner, also known as the policyholder, pays monthly premiums to maintain coverage. In the event of a covered injury or illness, the insurance company pays for the qualifying costs from the claim. A policyholder’s premium costs may increase or decrease based on the business’s number of employees, industry, and past workers’ comp claim history.

Determining how much workers’ compensation insurance costs the policyholder can be tricky, so it is important to get a fair quote from a trusted company like CompSource Mutual.

How much does workers’ compensation insurance cost?

There are several different factors to consider regarding how much workers’ compensation insurance costs. The first is the insurance carrier.

The insurance carrier takes on the risk of costly injuries that may occur on the job for its policyholders. Depending on the state in which you live, when a claim is filed, workers’ comp insurance companies, have the ability to pay for medical treatment directly to the medical provider or pharmacy. The insurance company funds itself through premiums, which the policyholders, or business owners, pay. To calculate the premium rate, insurance companies consider the size of the policyholder’s company, the total payroll, and the industry in which the company operates. Additionally, workers’ compensation insurance costs will reflect a business’s industry risk and claims history. Considering all of these relevant factors ensures adequate coverage to protect employees and promote a safe work environment.

Costs may also change depending on what state in which the business is located. Depending on the state, business owners may have access to multiple insurance providers or could be limited to one carrier.

The one party that does not pay workers’ compensation insurance costs is the employee. In fact, it is illegal to charge employees for workers’ compensation insurance. Workers’ comp insurance is a cost that is always shouldered by the employer and is in place to encourage safe working conditions and adequate support for employees.

What is Workers' Comp

Learn more about CompSource Mutual, proudly provided workers’ compensation insurance coverage to Oklahoma businesses for more than 85 years.Discover why it’s important for businesses to obtain workers’ comp to protect workers in the case of a work-related injury or illness.

How to calculate workers’ comp for employers

When calculating workers’ compensation insurance premium rates, two important factors to consider are the total payroll and the business’s class code. A company with a larger payroll will pay more in monthly premiums, simply because there are more employees to cover.

Class code is a way of categorizing businesses based on industry and function. If a business operates in a high-risk industry, such as logging, then the class code will be unique because of the industry’s inherent risk. Therefore, the insurance rate may be higher for that class code.

Another important factor is the experience modification rate, or mod rate. This rate is a variable unique to each business that insurance carriers consider after the company has accrued several years of workers’ comp claims. (Some insurance companies may instead wait until a company has paid a certain amount in premium before they assign a mod rate.)

The experience modification rate, also known as the e-mod, can increase or decrease the premium amount. A “debit mod” may be assigned to companies that have a history of frequent workers’ comp claims. This type of mod rate will increase the premium amount that the company pays to the insurance company. However, a “credit mod” may be assigned to companies that have fewer workers’ comp claims. This type of mod rate can reduce the amount that companies pay in premiums. Modification rates help incentivize businesses to provide safe working environments for employees.

Workers’ compensation insurance companies will consider both the inherent risk in each industry and the overall safety environment of a company when writing the workers’ comp policy and premium rates. As such, each rate is specific to each business.how the employers work to provide

Why CompSource Mutual

At CompSource Mutual, employee safety is our top priority. We provide fair and competitive prices for your coverage needs.Our team offers top-notch expertise to the businesses that support the Sooner State’s economy. Get the coverage and insight that you need from our experienced team. Request a quote.

Explore the Claims Process

Read this step-by-step guide about what happens after CompSource Mutual is notified of a workplace injury.

Workers’ compensation benefits may last anywhere from a few days to many years. This depends on the type and severity of the injury or illness. For example, if a workplace injury or illness results in a permanent disability, payments may be made to the employee for many years.

A rating below 1 is considered a “good” mod rate. A company can obtain this by having, on average, fewer workers’ compensation claims than other, similar companies in their industry. This may be achieved by instituting more rigorous safety practices, providing extra safety training for employees, and maintaining equipment properly. However, accidents do happen, and it may not be possible to completely prevent injuries and illnesses from occurring at work.

Work-related injuries, illnesses, and deaths impose significant costs on employers, workers, and the community – including direct and indirect costs. A premium payment to a workers’ compensation insurance provider is considered a direct cost to the business. An indirect cost may be an increase in fear or morale levels following an accident.

The amount each business pays is impacted by factors such as the industry classification for the type of work conducted by the business, a company’s claim history, which can reflect how safely the business operates, and what measures are taken to improve safety over time. For instance, heavy construction and civil engineering construction is inherently more dangerous than work that is conducted exclusively in an office environment Consequently, the industry rate will normally be higher.

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