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Insurance , Payroll , PEO , Small Business , Workers Comp

Workers’ Compensation Insurance Across States: Understanding Regional Differences

If you’re a business owner, understanding the necessity for workers’ compensation is imperative. Depending on the size of your organization, it may not be legally required. However, it might still be a good idea to protect your employees as well as your business in the event that someone gets injured at work.


Workers’ compensation insurance varies greatly from state to state. What does this mean for you as a business owner in terms of coverage and cost? Keep reading to learn more about regional differences in workers’ compensation insurance.

The importance of workers’ compensation insurance

Even with just one employee working for you, workers’ compensation insurance can play a big role in protecting you and your company financially. Not having some type of workers’ comp in place could be detrimental if an accident does occur at work.


If one of your employees gets injured on the job, without workers’ compensation, you could be held responsible for damages. This means you could be legally obligated to pay out-of-pocket for their medical care, any lost wages, and any other expenses related to the incident.

Why does it differ from state to state?

Many factors can contribute to workers’ compensation insurance differing regionally. Each state has its own specific requirements which are either determined by that state’s rating bureau or, more commonly, by the National Council on Compensation Insurance (NCCI).

Consider risky industries or businesses

The type of business you run and how much risk is involved does play a big role in the cost of workers’ compensation. Though this doesn’t always differ depending on location, companies that drill for oil, for instance, may see higher rates than a tech company whose employees typically sit at a computer for the majority of the day. The type of industry most commonly seen in certain areas can impact the average cost of workers’ comp in that region.

State regulations and how well your company follows them

State regulations can also affect workers’ compensation rates. These regulations typically come from the state itself, the Occupational Safety and Health Administration (OSHA), or the US Environmental Protection Agency (EPA).


As a business owner, it’s crucial to consider what potential safety risks or hazards your employees could face. Do you have rules set in place to help protect them from those risks? Generally speaking, if you follow the rules and regulations set into place by your state and an employee is still injured on the job, you should still be covered by workers’ comp. The better your track record of following those rules, the lower your premium costs will be.

Healthcare costs

The cost of healthcare also plays a role in workers’ compensation premiums. States that have higher healthcare costs may see higher rates for workers’ comp in order to cover those costs if an injury occurs. Some states or businesses, however, offer wellness programs to help reduce the cost of healthcare. In those instances, it may actually lower the cost of workers’ compensation premiums.

Understanding regional differences

There are many factors that can impact workers’ compensation from state to state. As a business, it’s important to dive deep into the regulations put into place by your own state to gain a firm understanding of what’s required.

If you’re looking for a way to simplify your workers’ comp insurance, consider working with a PEO or professional employer organization to help you streamline the process. They’ll help you get the coverage you need no matter where you’re located, how many employees you have, or how long you need to be covered.