Running a delivery service means managing constant movement, tight schedules, and the inevitable risks that come with the road. Whether you're operating a fleet of local delivery vans, managing a team of food couriers, or running an Amazon delivery service partner operation, workers' compensation insurance isn't just a legal requirement—it's your financial safety net when someone gets hurt on the job.
Here's the challenge: workers' comp for delivery services is more complex than most industries. Your drivers face unique hazards—from loading injuries and vehicle accidents to slip-and-falls during drop-offs. Insurance companies know this, which is why they assign specific class codes and rates to delivery work. Understanding how this system works can save you thousands of dollars while keeping your team protected.
Do You Actually Need Workers' Comp?
The short answer: if you have employees making deliveries, yes, you almost certainly need workers' compensation insurance. Nearly every state requires it once you hire your first employee, though the specific threshold varies. Some states require coverage from employee number one, while others set limits at three or five employees.
But here's where it gets interesting: the employee versus independent contractor distinction matters enormously. If you hire delivery drivers as employees, you need workers' comp. If you contract with independent drivers who control their own schedules and provide their own vehicles, they typically aren't covered under your policy—and in most states, you're not required to cover them.
Some states have carved out exceptions for gig economy workers. California, for example, requires app-based transportation and delivery companies to provide occupational accident insurance that covers medical expenses and lost income. Washington State extends workers' comp protection to rideshare and delivery drivers while they're actively working. But these are exceptions, not the rule.
The penalties for skipping coverage are severe. States have dramatically increased enforcement in recent years. In California, contractors without proper workers' comp coverage can face penalties up to $30,000 for repeat violations under new 2026 legislation. Most states impose fines starting at several thousand dollars per violation, plus you could be personally liable for any injuries that occur.
Understanding Class Codes and What You'll Pay
Workers' comp premiums are calculated using classification codes that reflect the risk level of your specific work. For delivery services, the most common code is 7231, which covers companies that deliver small packages and items on a local basis—think contract drivers for UPS, FedEx, or Amazon delivery service partners.
Class code 7231 carries higher rates than general trucking because the work is legitimately more dangerous. Your drivers make frequent stops, repeatedly load and unload packages of varying weights, navigate residential areas with tight turns and pedestrians, and often work under time pressure. Each of these factors increases injury risk.
Other delivery-related codes include 7230 for retail store delivery services and 7380 for miscellaneous delivery drivers. Getting the right code matters because it directly affects your rate. In 2025, the average workers' comp rate for delivery and trucking operations is around $6.33 per $100 of payroll—meaning you'd pay roughly $296 per month for a single driver earning $4,000 monthly. But this is just an average; actual rates vary significantly by state, with some running much higher.
Your total premium comes down to three factors: your class code's base rate, your total payroll, and your experience modification factor. That last one deserves its own section.
How Your Safety Record Affects Your Premium
Your experience modification factor, or e-mod, is a multiplier that compares your company's claim history to other businesses in your industry. It starts at 1.00, which is considered average. If your e-mod is 0.85, you get a 15% discount on your premium. If it's 1.20, you pay 20% more. This single number can swing your annual costs by thousands of dollars.
Here's how it works: your e-mod for 2025 looks at your claims from 2021, 2022, and 2023. The most recent full year is excluded to allow claims to fully develop. The formula weighs both the frequency and severity of claims, but here's the key insight—claim frequency matters more than severity. Having three small claims will hurt your e-mod worse than one large claim because the formula assumes you can control how often accidents happen better than you can control their ultimate cost.
For 2025, the NCCI (National Council on Compensation Insurance) increased the threshold for "primary" losses to $18,000 per claim. Claims below this amount are weighted more heavily in your e-mod calculation. What this means practically: lots of smaller claims—strain injuries from lifting, minor vehicle accidents, slip-and-falls—will drive up your e-mod faster than you might expect.
This is why prevention matters so much. A solid safety program isn't just good for your team—it's the most effective way to control your workers' comp costs long-term. Defensive driving training, proper lifting techniques, vehicle maintenance protocols, and clear weather-related policies all reduce claim frequency, which protects your e-mod.
What Actually Gets Covered
Workers' compensation covers medical expenses and lost wages when your delivery drivers get hurt on the job. This includes obvious scenarios like vehicle accidents, but also the less dramatic injuries that are actually more common: back strains from lifting, repetitive motion injuries, falls on icy driveways, and dog bites during deliveries.
When a covered injury occurs, workers' comp pays for all necessary medical treatment, from emergency room visits to surgery to physical therapy. If your driver can't work while recovering, the policy pays temporary total disability benefits—typically around two-thirds of their average weekly wage. In California, for example, these benefits increased in 2026 to a maximum of $1,764.11 per week.
What's not covered: injuries that occur outside of work, intentional self-harm, injuries from violating company policy (like DUI accidents), and injuries that happen during the commute to and from your business location. However, once a driver begins their delivery route, they're generally covered for the entire shift, including travel between stops.
Getting Coverage and Keeping Costs Down
Shopping for workers' comp starts with getting your classification right. Work with an insurance agent who understands delivery operations and can accurately classify your business. Misclassification—whether accidental or intentional—will catch up with you during the annual audit when the insurance company reviews your actual payroll and operations.
You'll pay a deposit premium based on your estimated payroll, then the carrier will audit your actual payroll at the end of the policy year and adjust accordingly. Keep meticulous payroll records separated by job classification—if you have drivers, warehouse staff, and administrative employees, each group gets its own class code and rate.
To keep premiums manageable, focus on claim prevention. Institute a formal safety program with regular driver training. Implement a return-to-work policy that gets injured employees back to modified duty quickly—this reduces lost-wage claims while showing the insurance company you're serious about controlling costs. Document everything: near-misses, safety meetings, vehicle inspections, and incident investigations.
Finally, don't just accept your renewal premium without question. As your e-mod improves, shop your coverage. Insurance carriers compete aggressively for businesses with good safety records. A broker who specializes in transportation and delivery can often find better rates by understanding exactly how to present your risk to carriers.
Workers' compensation for delivery services doesn't have to be a cost you simply accept. By understanding how class codes work, protecting your e-mod through strong safety practices, and ensuring proper coverage, you can keep your team protected while controlling one of your largest insurance expenses. The delivery business is risky enough—your workers' comp strategy shouldn't add to that uncertainty.
