Types of State Workers’ Compensation Funds
Before you get workers’ compensation coverage
, you’ll want to check with your state and see if they have a required insurance fund. For instance, if you own a California business, you’ll be able to choose either the state fund or private insurers because the state is competitive and not monopolistic.
Monopolistic State Fund for Workers’ Compensation
A monopolistic workers’ compensation insurance fund requires employers to buy workers’ compensation through a state insurance fund. Monopolistic states
Keep in mind that business owners in these states may not be able to:
- Shop around for the best quote: So, you’ll have to pay the rate that the state sets.
- Provide coverage for out-of-state employees: You’ll likely have to find separate insurance for them from the state they work in.
- Get employer’s liability coverage: This policy is essential for covering lawsuits and other workers’ compensation case costs that result from injured workers. It can help pay your legal expenses from lawsuits.
Be aware that monopolistic programs are sometimes out of alignment with the National Workers’ Comp Class Codes (NCCI). So, the workers’ comp class codes
used will be different and can result in higher costs.
Competitive State Fund for Workers’ Compensation
The second way that state programs offer workers’ comp is through a competitive state insurance fund. A competitive state fund allows business owners to choose workers’ compensation insurance from state agencies or through a private insurance carrier. This flexibility means you can choose coverage that fits your needs better than monopolistic programs. States with competitive insurance funds include:2
So, should a big or small business go with a state fund or private insurer for workers’ compensation coverage? There’s not an easy answer.
In a competitive state, the flexibility means the state program may also offer comparable rates to better compete with private carriers. But, more often than not, businesses use the state fund if they can’t get coverage through an insurance company. This could result in a higher rate or not as comprehensive coverage that’s offered through a private insurer.
Find Workers’ Comp Requirements in Your State
Most states require businesses with employees to carry workers’ comp insurance. However, state laws and exceptions can vary, so it’s important to know what your local rules are to make sure your business complies.
How Is Workers’ Compensation Insurance Funded Under a State Fund?
Under a state fund, businesses pay into an account that goes towards paying the workers’ compensation coverage.
Learn More About Workers’ Compensation Insurance Policies
Having the right workers’ compensation policy is essential for protecting your employees and your business. If your company is in a competitive state, there are a variety of options you can choose from.
We’ve been helping our customers find the right coverage for over 200 years. We’re proud to be an experienced insurance company that takes pride in knowing the unique challenges and risks that businesses like yours face. Whether you have questions about workers’ comp coverage or need help with a claim, we’ve got your back.
1 International Risk Management Institute (IRMI), “Monopolistic State Funds”
2 International Risk Management Institute (IRMI), “Competitive State Funds”