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Workers' Compensation California: Rules & Policy Options

Workers' compensation insurance starts as low as $20/month*

*Applies to quotes made through Insureon only. Average monthly premium calculations are estimates and may vary by state, insurance provider, and the nature of your business. Where required or allowed by state law, insurance taxes, service fees, and other surcharges may be included and billed separately from the premium.

Quotes available through: Insureon
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At a glance, California law states the following:?

  1. Your workers’ comp coverage must be continuous and uninterrupted. If it’s not, you could have your business license revoked.
  2. Not having workers comp is a criminal misdemeanor in California – punishable by a ceasing of business operations, jail time, hefty fines, and large payouts by the business owner.?
  3. In California, workers comp must apply to all employees. This includes both part-time and full-time workers, though some exceptions may apply.
  4. It’s illegal to ask your employees to pay for workers’ comp in California.
  5. You cannot fire employers to mistreat them for filing a workers’ comp claim.

Workers’ compensation insurance is an ideal solution to the risks posed to both business owners and employees while at work.

Workers’ compensation gives employees access to medical treatment for illnesses that happen at work regardless of who is at fault. In return, employees cannot file a lawsuit relating to these injuries.?

California requires all companies with at least one employee to have workers’ compensation insurance and has special requirements for sole proprietors in the construction industry.

Use our online tool to find the right policy for you and ensure you are covered.

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Company Name
Types of Insurance Offered
AM Best Financial Strength Score
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The Hartford
The Hartford
Workers' Comp - Sole Proprietors - BOP - General Liability - Professional Liability - Commercial Auto - Fidelity Bond
A+ (Superior)
Workers' Comp - Sole Proprietors - BOP - General Liability - Professional Liability
A++ (Superior)
Liberty Mutual
Liberty Mutual
Workers' Comp - Sole Proprietors - BOP - General Liability - Commercial Auto
A (Excellent)
Nationwide
Nationwide
Workers' Comp - Sole Proprietors - BOP - General Liability
A+ (Superior)
Workers' Comp - Sole Proprietors - BOP - Professional Liability
A++ (Superior)

What does workers’ comp cover in California?

California workers’ comp insurance provides medical and financial benefits to employees who are injured or fall ill on the job.?

California workers’ comp benefits include:

It’s worth noting that under California’s workers’ comp laws, the business owner can also receive coverage as part of the policy. This is not the case in some other states, so we recommend checking to ensure this coverage is included in the policy you choose.

That said, plan inclusions and limits can differ depending on the provider. It’s important to consider plan benefits (such as the ones above), as well as the overall cost, ease of access to in-network doctors, and access to claims handlers.

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Who needs workers comp in California?

California Labor Code Section 3700 requires all employers with at least one employee to have a workers’ compensation policy. This includes employers in the construction industry who may be exempt in other states.

Employers located outside of California are also required to have workers comp if they have an employee who works regularly in California.?

According to the Business and Professions Code section 7125, special rules apply to some contractors who are required to carry workers’ comp insurance or a Certification of Self-Insurance regardless of whether they have employees or not.?

Contract workers who are required to carry workers’ comp include:?

Workers’ Comp for Sole Proprietors?

With the exception of some trades, most sole proprietors in California are not required to have worker’s compensation as long as they don’t have any employees.

That said, if you are a sole proprietor and want coverage, there are workers’ compensation plans available to you.

If you decide to get workers’ comp as a sole proprietor in California, you are required to ensure that your policy clearly states the inclusion of a sole proprietor or that the policy has a coverage endorsement for sole proprietors.?

Alternatively, you might consider extending coverage to other types of insurance policies, such as health insurance, life insurance or disability income insurance.

California workers’ comp exemption requirements

Some companies may have employees who qualify for California’s workers’ compensation exemption. This means you wouldn’t need to have workers’ comp for employees that qualify for the exemption. If this is the case for your business, you may be required to file an exemption with the state.

For information on exactly which types of workers qualify for a workers’ compensation exemption in California, you should refer to the California Labor Code, Division 4, Part 1, Chapter 2, Section 3352.

In the meantime, here are a few general examples of who may qualify for an exemption:

Even if you are exempt by law, we recommend you still consider opting for a workers’ compensation policy as it can save you in the event of becoming injured on the job by paying your medical bills as well as lost wages. This is especially true if you work in an environment with high risk of injury such as electricians or handymen.?

Consequences of getting caught without workers’ comp in California

The California labor code requires all companies with at least one employee to have workers’ comp. If you fall under this requirement and are caught without workers’ comp in California, the state will issue a stop order for all business activity related to your company.

In this case, you will have 60 days to get workers’ comp coverage and prove to the state that you have insurance. If you are unable to do so, you will be charged with a misdemeanor which can carry a 60-day jail sentence, a $10,000 fine, or both.?

Additionally, the California Division of Labor Standards Enforcement team may also consider further action, which can include one of the following:

  1. A fine equivalent to twice the amount you should have paid in workers’ compensation premiums for the length of time you were uninsured.?
  2. A fine of $1,500 per employee who was employed at your company during the time you were uninsured, according to Labor Code section 3722(b).

The Labor Code Section 3722(d) and (f) also explains what happens if one of your employees files a workers’ comp claim and you are found to not have a workers’ compensation insurance plan as required by law.

In this case, you may be charged with one of the following fines depending on whether the judge decides the claim requires compensation or not:

  1. If the claim requires compensation, you may be charged $10,000 per employee on the payroll at the time of injury.
  2. If the claim does not require compensation, you may be charged $2,000 per employee (maximum amount of $100,000) on the payroll at the time of injury.

Needless to say, you should ensure you have workers’ compensation secured before starting business operations.

What happens if an employee is injured and you don’t have workers’ comp?

According to Section 3700.5 of the California Labor Code, if an employee is injured and you don’t have workers’ compensation, it’s considered a criminal misdemeanor and carries a minimum fine of $10,000, a maximum one-year prison sentence, or both.?

Apart from this, you will legally be required to pay all claims that arise from your employee’s injuries or illness.?

The state of California can also issue you a separate fine of up to $100,000 as the employer.

Where to get workers’ compensation in California

There are three main options for getting workers’ comp coverage in California:

  1. Buying a plan from a licensed insurance provider
  2. Buying a plan from California’s State Compensation Insurance Fund
  3. Declaring yourself self-insured

Let’s take a closer look at these options below.

Buying a plan from a licensed insurance provider

Buying workers’ comp through a private insurer often makes the most sense as it is usually the easiest and the cheapest method. Since private insurers compete for clients, it’s generally easy to get a better deal and ensure you get the best business insurance coverage for your needs.?

You can easily sign up for workers’ compensation online or over the phone when you opt to buy from a licensed insurance provider.?

The quickest way to find a plan is to use an online quote tool that can match your specific business with the right insurance plan. These tools ask questions about your business, then show the best policy options based on your answers.?

With a private insurer, you can also often find deals on other types of policies by combining workers comp with more types of coverage. For example, you may want to opt for a business owner’s policy which includes general liability, and commercial property insurance in one plan.

Buying a plan from the California State Compensation Insurance Fund

In California, the State Compensation Insurance Fund is a non-profit organization that can provide workers’ compensation insurance to businesses the same way a private insurance provider would. It’s self-supported from the revenues made off insurance premiums, similar to how a private insurer operates.?

The main role of the State Fund is to serve as a fallback option for companies that are denied workers’ compensation insurance through a private insurer. As a result, State Fund policies can sometimes be a bit more expensive than getting a workers’ compensation policy through a private insurer.?

Declaring yourself self-insured

Self-insuring allows employers to oversee their company’s workers’ compensation claims via an internal administration team or a third-party administrator. Although self-insurers get greater control over the claims process compared to the other options, it is arguably the hardest and most expensive method for providing workers’ comp.

In California, you must get state approval through the Office of Self-Insurance Plans to be able to opt for self-insurance.?

Eligibility requirements for self-insurance in California include:

  1. Having a minimum net worth of $5 million
  2. Having a minimum net income of $500,000 per year
  3. Paying a security deposit

How much is workers’ comp in California??

The insurance provider Insureon states that the average cost of workers’ compensation insurance in California is $62 per month, versus the national average of $45 per month.

Get workers’ comp starting as low as $20 per month*

*Applies to quotes made through Insureon only. Average monthly premium calculations are estimates and may vary by state, insurance provider, and the nature of your business. Where required or allowed by state law, insurance taxes, service fees, and other surcharges may be included and billed separately from the premium.

The cost of workers’ compensation insurance is calculated on an individual basis for each business and can vary greatly depending on several factors, such as:?

  1. The number of employees you have
  2. Type of employees and their class code
  3. Your payroll
  4. Your company’s claims history??

Bearing this in mind, it’s best to specifically calculate how much workers comp will cost your business using a workers comp calculator or a similar tool.

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How to save money on workers’ comp in California?

The good news for California businesses is that workers’ comp prices are not regulated by the state. This means that competition is free and open. Therefore, there are ample opportunities to get a good deal on a workers’ compensation plan.?

Here are 4 top tips for saving on workers comp in California:

1

Opting for insurance through a private insurance company

Getting insurance through a licensed insurance company is usually cheaper than opting for insurance through the state fund. As mentioned before, most insurance providers compete against each other on price, whereas the State Fund has a more captive audience (people who can’t get insurance anywhere else) and can charge higher prices.?

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2

Using a comparison tool to get matched with several plans

Online comparison tools can take the extra leg work out of finding a provider. You can enter your company’s information and get quotes for suitable plans all in one place. This can help you save time and money as you can quickly see the prices of plans available to you all in one place. This way you can opt for the cheapest option that best suits your needs.?

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3

Implementing risk mitigation strategies in the workplace

The monthly cost of workers compensation goes up the more claims or accidents you have. Therefore it’s important to try and keep your workers as safe as possible to avoid claims against your insurance. Doing a risk assessment, preparing the workplace so it’s as safe as possible, and training your workers on workplace safety are all things that can help reduce accidents and injuries at work. Therefore, your premiums should also remain lower.

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4

Ensuring your employees are classified correctly

The cost of workers compensation plans is influenced by the classification of your employees. Different types of employees fall into different categories. Some cost more than others to insure. By double checking you are classifying your employees correctly, you can also ensure you aren’t accidentally overcharged.

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Leigh Morgan
Leigh Morgan Personal Finance

Leigh Morgan is a seasoned personal finance contributor with over 15 years of experience writing on a diverse range of professional legal and financial topics. She specializes in subjects like navigating the complexities of insurance, savings, zero-based budgeting and emergency fund development.

In the last five years, she’s authored over 300 articles for credit unions, digital banks, and financial professionals. Morgan is also the author of “77 Tips for Preventing Elder Financial Abuse,” a book focused on helping caregivers protect the elderly from financial scams.

In addition to her writing skills, she brings real-world financial acumen thanks to her previous experience managing rental properties as part of a $34 million real estate portfolio.

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