For US Contractors — Updated July 2026
State-by-state requirements, how pay-as-you-go pricing works, what an Experience Modification Rate actually does to your premium, and how ERGO NEXT, The Hartford, Travelers, and Progressive compare for contractor workers’ comp in 2026.
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State Requirements
A framer falls two rungs off a ladder and tears a shoulder. An electrician gets a shock reaching into a panel that wasn’t fully de-energized. A laborer throws out their back lifting bags of mortar mix. These are the injuries workers’ comp exists for — not catastrophic, headline-grabbing accidents, but the routine physical toll of trade work that adds up over a career.
For a contractor with even one employee, workers’ comp isn’t optional in most states — it’s a legal requirement with real teeth. Operating without it when the law requires it can mean stop-work orders, steep fines, and personal liability for a hurt worker’s entire medical bill. And because premiums are driven by a formula most contractors have never actually seen, plenty of business owners overpay for years without realizing it.
This guide breaks down what workers’ comp covers, which states require it and for whom, how the premium formula actually works, and how four major providers — ERGO NEXT, The Hartford, Travelers, and Progressive — compare for contractors buying in 2026. It’s an educational editorial overview, not a substitute for a licensed insurance professional or your state’s workers’ compensation board.
What Workers’ Compensation Actually Covers
Workers’ comp is a no-fault system: an injured employee doesn’t need to prove you were negligent to get benefits, and in exchange, they generally give up the right to sue you directly for the injury. That trade-off is the core of the whole system.
Doctor visits, hospital stays, surgery, physical therapy, and prescriptions tied directly to a work-related injury or illness.
Partial wage replacement while an injured employee is unable to work, typically a set percentage of their average weekly wage.
Additional payments for temporary or permanent disability resulting from a workplace injury, scaled to the severity of the impairment.
Retraining support if an injury prevents an employee from returning to their previous role or trade.
Funeral costs and ongoing financial support for dependents in the event of a fatal workplace accident.
A companion coverage that defends you if an injured employee sues over circumstances the no-fault system doesn’t fully resolve.
What it typically excludes: injuries during a commute to or from the jobsite, injuries during an unpaid lunch break off-site, self-inflicted injuries, and injuries sustained while an employee was intoxicated or violating clear safety policy — exact exclusions vary by state.
Workers’ Comp Requirements by Situation
Requirements are set state by state, and they hinge on employee count, trade, and business structure — there’s no single federal rule. Here’s how the most common situations typically break down. Always confirm directly with your state’s workers’ compensation board, since rules and thresholds change.
| Situation | Typical Requirement | Notes |
|---|---|---|
| Sole proprietor, no employees | Usually exempt | Some states mandate coverage for specific trades regardless |
| 1+ W-2 employees | Required in most states | Thresholds vary — some states require it from employee #1 |
| California contractors | Moving toward mandatory for all licensed contractors | SB 216 requirement delayed to January 1, 2028 by SB 1455 |
| Texas private employers | Not mandated for most | Texas is a largely opt-out state — but contract terms may still require it |
| ND, OH, WA, WY | Required through state fund only | Monopolistic states — private carriers cannot write this coverage |
| Independent subcontractors | Not covered by GC’s policy | A GC’s payments to an uninsured sub can be reclassified as payroll on audit |
* General reference only — not legal advice. Confirm current thresholds and exemptions with your state workers’ compensation board before making coverage decisions.
How Your Premium Is Actually Calculated
Unlike general liability, workers’ comp pricing follows a fairly transparent public formula — most contractors just never see it broken down. Understanding it is the fastest way to spot an overpriced quote.
Your total insurable payroll for covered employees — the base the whole formula is built on. Higher payroll means higher premium, all else equal.
A per-$100-of-payroll rate tied to your trade’s NCCI class code. Roofing and demolition carry much higher rates than office administration or estimating staff.
A multiplier reflecting your claims history versus the industry average. 1.0 is average; below 1.0 lowers your premium, above 1.0 raises it.
A worked example: a roofing crew with $200,000 in annual payroll, a classification rate of $8.00 per $100, and an EMR of 0.95 would pay roughly (200,000 ÷ 100) × 8.00 × 0.95 = $15,200 per year. The same payroll with a poor claims history and a 1.25 EMR would pay $20,000 — a direct, calculable cost of safety incidents.
Pay-As-You-Go vs Traditional Annual Billing
How you pay for workers’ comp matters almost as much as how much you pay. Traditional annual billing estimates your payroll upfront and reconciles with an audit at year-end — often producing a surprise bill. Pay-as-you-go billing ties premium directly to real payroll as it happens.
✓ Pay-As-You-Go Advantages
- Premium scales automatically with seasonal payroll swings
- No large lump-sum deposit required upfront
- Smaller, more predictable year-end audit adjustment
- Better cash flow matching for contractors with variable crews
- Often integrates directly with payroll software
— Traditional Annual Billing Tradeoffs
- Requires an upfront payroll estimate, often imprecise
- Bigger cash outlay due at policy inception
- Year-end audit can produce a large unexpected bill
- Less forgiving for contractors with unpredictable crew size
For contractors with a steady crew size, the difference is mostly about cash flow timing. For contractors who scale up and down seasonally — landscapers, roofers with a summer rush — pay-as-you-go can meaningfully reduce the risk of a painful year-end true-up.
How the Top Providers Compare for Contractors
Each provider is evaluated on contractor trade fit, billing flexibility, claims support, and digital access. Product details and prices change; request a current quote before buying. Note: NEXT Insurance rebranded as ERGO NEXT in January 2026 following its integration with Munich Re’s ERGO Group.
| Provider | Billing Model | Digital Quote | Trade Specialists | Best For | Score |
|---|---|---|---|---|---|
| ERGO NEXT | Pay-as-you-go | ✓ | ✗ | Solo & small crews | 4.6 |
| The Hartford | Both options | ✓ | ✓ | Established crews | 4.6 |
| Travelers | Annual, agent-based | ✗ | ✓ | High-risk trades | 4.3 |
| Progressive | Both options | ✓ | ✗ | Bundled auto + WC | 4.2 |
ERGO NEXT
Best Overall
ERGO NEXT — the rebranded identity NEXT Insurance adopted in January 2026 following its integration with Munich Re’s ERGO Group — remains a digital-first option built for small contracting businesses. The pay-as-you-go billing model ties premium directly to real payroll, which suits contractors with fluctuating crew sizes across the season.
Certificates of insurance are available directly from the app, which matters the same way it does for general liability — a foreman asking for proof of workers’ comp coverage on the morning of a job start needs an answer in minutes, not days.
✓ Pros
- Pay-as-you-go billing reduces year-end audit surprises
- Fast online quote and binding for eligible trades
- In-app certificate of insurance generation
- Backed by Munich Re / ERGO Group financial strength
— Cons
- No dedicated trade-specialist agents
- Self-serve claims process, not a live claims handler
- Higher-risk trades may see limited eligibility
The Hartford
Best for Crews
The Hartford is the second-largest workers’ comp provider in the country, with a claims infrastructure built specifically around trade injuries. Nurse case managers work directly with injured employees to coordinate care and manage return-to-work timelines, which can meaningfully shorten recovery and reduce the eventual claim cost.
For a contractor with a real crew — five, ten, twenty employees across active jobsites — the depth of the claims process is often worth more than a slightly lower headline rate. It can also bundle with GL, commercial auto, and BOP through a single carrier relationship.
✓ Pros
- Industry-leading claims and nurse case management
- Bundles with GL and commercial auto under one carrier
- Trade-specific underwriting expertise
- A+ AM Best financial strength rating
— Cons
- Slower quote process than digital-first competitors
- Overpriced for solo operators with no employees
- Broker or agent typically required to bind
Travelers
High-Risk Specialist
Travelers is generally a stronger fit for higher-risk trade classes — roofing, demolition, structural steel — where digital-first insurers often decline coverage or price it out of reach. The tradeoff is a fully agent-mediated process without the same-day binding of a digital-first competitor.
Travelers also brings meaningful safety-engineering resources to the table, which can matter directly for EMR management over time on higher-risk crews.
✓ Pros
- Strong appetite for high-risk trade classifications
- Access to safety-engineering and loss-control resources
- Established claims infrastructure for construction
— Cons
- No direct digital quote — agent required
- Slower binding process than PAYG-first competitors
- Less competitive pricing for low-risk trades
Progressive
Bundling Pick
Progressive’s contractor package, sold through its Advantage Business Program, is a natural fit for contractors who already carry (or plan to carry) commercial auto through Progressive and want workers’ comp bundled under the same relationship. Progressive reports an average cost of roughly $121/month and a median of roughly $76/month for this package — both above the broader small-business market median cited earlier, reflecting the mix of trades and payroll sizes in its contractor book.
It’s less of a specialist play than The Hartford or Travelers, but the bundling convenience and digital account management make it a reasonable default for contractors who value one login over the deepest possible claims infrastructure.
✓ Pros
- Strong bundling with commercial auto
- Both pay-as-you-go and annual billing available
- Digital account management for policy and billing
— Cons
- Less trade-specific underwriting depth than Travelers
- Pricing spread is wide — quote before assuming savings
- Claims handling less specialized for construction injuries
How to Choose the Right Workers’ Comp Policy
The right provider depends more on your trade risk class and crew size than on any single “best overall” ranking. Here’s a practical framework.
Confirm your state’s exact trigger
Some states require coverage from employee #1; others allow small exemptions. Check your specific state board before assuming last year’s rule still applies.
Match provider to trade risk
Low-risk trades generally get better rates from digital-first insurers. High-risk trades often do better with a specialty carrier’s underwriting appetite, even with a slower process.
Choose your billing model deliberately
If your crew size fluctuates seasonally, pay-as-you-go materially reduces cash-flow risk. If your payroll is stable year-round, the difference matters less.
Ask how your EMR was calculated
Request the experience rating worksheet from any quote. An EMR error is common and directly overpays your premium every year it goes uncorrected.
Invest in the thing that actually lowers cost
A documented safety program and fast injury reporting reduce claims severity, which compounds into a lower EMR — and a lower premium — over multiple renewal cycles.
Frequently Asked Questions
In most states, workers’ comp is only mandatory once you hire employees. Sole proprietors with no employees are typically exempt, though some states and some trades — like roofing — mandate coverage regardless. California is moving toward requiring it for all licensed contractors under SB 216, though the deadline has been pushed to January 1, 2028 by SB 1455.
Premium is roughly Payroll ÷ 100 × Classification Rate × Experience Modifier (EMR). Higher-risk class codes carry higher base rates, and a claims history worse than average raises the EMR above 1.0, increasing the premium. A clean claims history lowers EMR below 1.0 and reduces cost.
Pay-as-you-go billing ties premium payments to actual, real-time payroll instead of an upfront annual estimate. This improves cash flow and reduces the size of the year-end audit adjustment — particularly useful for contractors with seasonal crew swings.
North Dakota, Ohio, Washington, and Wyoming require employers to buy workers’ comp exclusively through a state fund rather than a private carrier. Contractors operating in these states cannot shop the private market for that state’s coverage, though they may still need private coverage for other states they operate in.
Yes. NEXT Insurance rebranded as ERGO NEXT Insurance in January 2026 following its integration with ERGO Group, part of Munich Re, as part of an international expansion strategy. It continues to operate as a digital-first insurer for small businesses, including contractors.
State audits can reclassify a misclassified worker as an employee, triggering back premiums, fines, and — in some states — criminal exposure for repeated or willful violations. Misclassification doesn’t remove your legal exposure if a workplace injury occurs; it just increases the eventual cost when discovered.
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