10 Most Asked Workers' Comp Questions — Answered

1. What is workers' compensation insurance?

Workers' compensation insurance is a policy that covers medical expenses, lost wages, and rehabilitation costs for employees who are injured or become ill as a result of their job. It also protects employers from most workplace injury lawsuits by providing a no-fault system for handling claims. Every state except Texas requires businesses with employees to carry workers' comp.

2. Do I need workers' comp if I only have one employee?

In most states, yes. States like California, Idaho, Oregon, Nevada, Hawaii, New Hampshire, Massachusetts, and Utah require workers' comp as soon as you hire your first employee. Other states like Missouri, Tennessee, Arkansas, and Georgia set the threshold at 3-5 employees. Even part-time and seasonal workers count toward the employee count in most states.

See workers' comp requirements for all 23 states we're licensed in.

3. How much does workers' comp cost?

Workers' comp rates range from $0.20 per $100 of payroll for office workers to $25+ per $100 for high-risk trades like roofing. The average across all industries is roughly $1.00-$2.00 per $100 of payroll. Your rate depends on your industry class code, state, total payroll, claims history, and experience modification rate (EMR). A restaurant with $300,000 in payroll might pay $4,500-$12,000 annually.

For a complete breakdown with cost examples by industry, see our full guide to workers' comp costs.

4. What does workers' comp actually cover?

Workers' comp covers medical expenses related to workplace injuries, a portion of lost wages (typically around two-thirds of the employee's average weekly wage) during recovery, rehabilitation and physical therapy costs, disability benefits for permanent injuries, and death benefits for the employee's dependents if a workplace injury is fatal. Coverage applies regardless of who was at fault for the injury.

5. What's NOT covered by workers' comp?

Workers' comp does not cover injuries from employee fights started by the injured worker, injuries sustained while intoxicated or using illegal drugs at work, self-inflicted injuries, injuries that occur during the employee's commute to or from work (with some exceptions), or injuries that happen during non-work activities even on company property. Emotional injuries without accompanying physical trauma are also typically excluded.

6. Do I need workers' comp for 1099 contractors?

It depends on whether the contractor carries their own workers' comp coverage. If a 1099 contractor provides a valid certificate of insurance showing their own workers' comp policy, they are not covered under yours. However, if they don't have their own coverage, they are typically treated as your employees for workers' comp purposes — meaning they get picked up on your policy and you pay premium on their compensation at the annual audit. This is why carriers require certificates of insurance from every subcontractor. Also be aware that misclassifying employees as 1099 contractors to avoid coverage is a major compliance risk that can trigger back premiums, penalties, and lawsuits.

7. How can I lower my workers' comp premium?

You can lower your workers' comp premium by shopping multiple carriers to get competitive quotes, ensuring every employee is correctly classified under the right class code, implementing a documented safety program with regular training, managing claims aggressively through return-to-work programs and quick incident reporting, and maintaining a low experience modification rate (EMR) over time by reducing claims frequency.

8. What is an experience modification rate (EMR)?

Your experience modification rate is a factor that compares your business's actual claims history to the expected claims for other businesses of your size and industry. An EMR of 1.00 is average. Below 1.00 means you have fewer claims than expected and you get a discount on your premium. Above 1.00 means more claims than expected and your premium goes up. Many general contractors require subcontractors to have an EMR below 1.00 before allowing them on job sites.

9. Are remote employees covered by workers' comp?

Yes, in most states. Employees working from home are covered by workers' comp for injuries that arise out of and in the course of employment — the same standard applied to in-office workers. This means if a remote employee is injured while performing work duties at their home office, the claim is generally covered. Injuries during breaks, personal errands, or purely personal activities are not covered.

10. What happens if I don't have workers' comp?

Operating without required workers' comp insurance exposes your business to severe consequences. Penalties vary by state but can include daily fines ranging from $50 to $1,000 per day, stop-work orders that shut down your business, criminal charges including misdemeanor or felony prosecution, and personal liability for all employee injury costs. California fines can reach $100,000, and New York treats intentional non-compliance as a felony.

Check your state's specific penalties in our state-by-state requirements guide.