The short version
Your work comp price comes down to three things: your payroll, how your people are classified, and your claims history (your experience mod). Most owners overpay because one of those is wrong — a class code that's off, a mod that's drifted, or a program they got parked in early and never left.
What work comp actually covers
Work comp pays medical bills and a portion of lost wages when someone is hurt doing work for you. In exchange, it generally limits your liability for those injuries. Most states require it once you have employees — it isn't optional, and going without it where it's required is a serious problem.
The three things that set your price
1. Payroll. Premium is calculated on your payroll, by type of work. More payroll, more premium — which is why how it's broken out matters so much.
2. Class codes. Every kind of work has a classification, and each one is priced differently. If your people are coded into a more expensive class than the work they actually do, you overpay — quietly, every year. Misclassification is the single most common reason a work comp bill is set too high.
3. Your experience mod. This is a multiplier based on your claims history. A 1.0 is average; below 1.0 means you pay less than a comparable business, above 1.0 means more. A clean history is real money in your pocket.
Your experience mod follows you — not the business
This is the one that surprises people. A rough claims history doesn't reset when you start a new entity — the mod follows the owner. Opening "a new company" to escape a bad mod doesn't work, and assuming it does can cost you for years. The flip side is good news: a clean history is an asset you carry with you, and it's worth protecting.
The state fund, and why newer businesses land there
If you're newer, there's a good chance your work comp is in the state fund. That's normal — new businesses often don't qualify for other programs yet, so that's where they start. It isn't a knock on you.
The mistake is staying there on autopilot. Once you've got a couple of years and a clean claims history, there are often better programs and credits available — and the difference can be significant. If you've been in the same place since you opened, it's worth having someone check whether you still belong there.
Pay-as-you-go
Traditional work comp takes a big deposit up front based on estimated payroll, then trues up at the year-end audit — and that true-up can sting. Pay-as-you-go ties your premium to your real payroll as you run it. Easier on cash flow, and far fewer audit surprises.
Subcontractors count, too
If you pay a subcontractor and can't show they carried their own coverage, your work comp can charge you premium for them as if they were your employee. Collect a current certificate from every sub, covering the dates they work for you, before you pay them. (More on that in the certificates guide.)
A few things owners get wrong
- Assuming a new entity wipes out a bad mod — it doesn't; the mod follows the owner.
- Paying an injury out of pocket to "keep the record clean" — it can mean taking on liability you'd otherwise have transferred to the insurance company. Report it; that's what the coverage is for.
- Letting class codes go stale as the work changes — the codes should match what your crew actually does today.
- Skipping a safety program — documented safety practices can earn credits.
- Ignoring return-to-work — getting an injured employee back on light duty usually lowers claim cost and protects your mod.
- Treating the year-end audit as a formality — messy records mean the auditor's assumptions, and they rarely favor you.
How to actually lower it
- Get your class codes right — and keep them current
- Keep clean payroll and subcontractor records (a bookkeeper pays for itself here)
- Collect certificates from every sub, every time
- Build and document a basic safety program
- Use a return-to-work plan after an injury — it usually lowers claim cost and protects your mod
- Re-shop it once you've got two years and a clean record — you may have outgrown where you were placed
When to reach out
Reach out when your work comp jumped and you don't know why, when you get an audit bill that looks off, when you're hiring or adding subs, or when you've passed the two-year mark with clean claims and want to know if you can do better. Most of the time I can tell you in a few minutes whether your price is fair — or whether something's set too high.
Prepared by Ben Page, Page Insurance, as a general reference. General information, not advice on your specific policy.