How Much Does Workers Comp Insurance For Contractors Cost?

How Much Does Workers Comp Insurance For Contractors Cost?

If you’re a contractor in Michigan, one of the most important coverages you need is workers compensation insurance. But how much does workers’ comp cost for contractors, and what factors determine your premium? Let’s break it down so you have a clear understanding of what to expect.

Payroll: The Biggest Factor

Workers comp insurance is primarily based on payroll. The more employees you have—and the higher their wages—the higher your premium. This is because more workers on the job means more potential exposure to workplace injuries.

Job Classification Codes and Risk Levels

Not all work is treated the same. Each type of job has a classification code with its own rate.

• High-risk trades like roofing and electrical work typically have higher rates.
• Lower-risk jobs like office staff or administrative workers are assigned lower rates.

If you employ both, your workers comp premium will be calculated using a mix of these classification codes.

The Audit Process

Most workers comp policies are audited at the end of each policy term. The audit checks your actual payroll numbers and job classifications.

• If your payroll ends up higher than your original estimate, you could owe additional premium.
• If it’s lower, you may receive a refund.

This is why it’s important to estimate payroll as accurately as possible when starting a policy.

Pay-As-You-Go Options

Some insurance companies offer pay-as-you-go workers comp. Instead of estimating payroll upfront, your premium is calculated in real time based on actual payroll numbers. This option can:

• Prevent large audit adjustments.
• Help seasonal contractors better manage cash flow.

Safety Programs and Discounts

If your business has a strong safety program, you may qualify for discounts. Carriers reward contractors who actively reduce workplace risks with training, safety meetings, and documented procedures.

Typical Cost Range for Contractors in Michigan

To give you a general idea:

• Workers comp insurance for contractors in Michigan typically ranges from 2% to 10% of your payroll.
• Example: If your annual payroll is $100,000, your cost could be between $2,000 and $10,000 per year, depending on the type of work, your claims history, and other factors.

Final Thoughts

Workers’ compensation insurance is not only legally required in Michigan for most businesses with employees—it’s also critical to protecting both your workers and your business.

By understanding the main cost drivers like payroll, classification codes, and safety programs, you’ll be in a much better position to budget for workers’ comp and potentially reduce your costs over time.