If you run an electrical contracting business, you've probably heard that workers' compensation insurance is required. But here's what trips up most electrical contractors: it's not just about checking a box. Your workers' comp policy affects your bottom line, your ability to win bids, and whether you can legally operate in most states. Get it wrong, and you could face fines, lawsuits, or even losing contracts with general contractors who won't hire subs without proper coverage.
The good news? Once you understand how workers' comp works for electrical contractors—what it costs, which class codes apply to your work, and how your safety record impacts your rates—you can make smart decisions that protect your business and save money.
Do Electrical Contractors Really Need Workers' Comp?
Short answer: yes, in almost every case. In most states, you're required to carry workers' compensation insurance the moment you hire your first employee. It doesn't matter if that employee works part-time or just started last week—if they're on your payroll, you need coverage.
There are a few exceptions. Some states allow very small businesses (typically sole proprietors with no employees) to operate without it. And in certain states, you can opt out if you're an owner-operator. But here's the catch: even if your state doesn't require it, most general contractors do. Many GCs won't even let you bid on jobs unless you can provide proof of workers' comp coverage with at least $500,000 in employer's liability limits.
California takes things further. Starting in 2028, all licensed contractors in California will be required to carry workers' comp regardless of whether they have employees, thanks to Senate Bill 216. So if you're a solo electrical contractor in California, this is coming your way.
How Much Does Workers' Comp Cost for Electrical Contractors?
Workers' comp premiums for electrical contractors average around $2.63 per $100 of payroll in 2025. That works out to roughly $87 per month per employee. But that's just a baseline—your actual cost can range from $2.63 to $3.50 per $100 of payroll depending on several factors.
Location makes a big difference. In North Carolina, electrical contractors pay around $49 per month per employee. In New York, that number jumps to $67 per month. Other states fall somewhere in between. Why the variation? Each state sets its own rules, medical fee schedules, and benefit requirements, which all affect what insurers charge.
Your payroll size also matters. Workers' comp is based on your total payroll, so the more people you employ and the higher their wages, the more you'll pay. This makes sense—a bigger workforce means more potential for injuries, which means higher risk for the insurance company.
Class Codes: Why They Matter for Your Premium
This is where things get interesting. Workers' comp insurers don't just lump all electrical contractors together. They use four-digit classification codes—managed by the National Council on Compensation Insurance (NCCI)—to categorize different types of electrical work. Each code corresponds to a different level of risk, and different risk levels mean different rates.
For example, fire alarm installation work typically falls under class code 5146. General electrical work might be classified under code 661 or 2661 (the '2' prefix is often used for staffing companies that provide electrical contractors). The specific code assigned to your business depends on the type of electrical work you do most often.
Here's the catch: not all states use NCCI codes. California, New Jersey, New York, Delaware, and Pennsylvania have their own classification systems. If you operate in one of these states, you'll need to work with your insurance agent to make sure you're classified correctly under your state's system.
Getting the right class code is crucial. If you're misclassified, you could end up overpaying for coverage—or worse, being underinsured if an injury occurs. When you're shopping for workers' comp, make sure your agent understands exactly what kind of electrical work your crew does.
Your Experience Mod Can Make or Break Your Business
Your Experience Modification Rate (EMR or X-Mod) is probably the single most important number you need to know about your workers' comp policy. It's a multiplier that adjusts your premium based on your company's claims history compared to other electrical contractors.
An EMR of 1.0 is average—it means your claims experience matches what's typical for businesses like yours. If you have fewer claims than average, your EMR drops below 1.0, which reduces your premium. More claims than average? Your EMR goes above 1.0, and your premium increases.
Here's why this matters so much: many general contractors and developers won't hire subcontractors with an EMR above 1.0. That's not a suggestion—it's a hard cutoff. If your EMR is 1.01 or higher, you can literally be disqualified from bidding on jobs. For electrical contractors trying to grow their business, a poor EMR is a competitive death sentence.
Your EMR is recalculated annually based on the past three years of claims history. So if you've had a rough year with several injuries, you won't see the impact immediately—but it'll catch up with you over the next few years. The flip side is also true: improving your safety record today will lower your premiums down the road.
What Workers' Comp Actually Covers
Workers' compensation isn't just about covering medical bills when someone gets hurt on the job. It provides four main types of benefits:
First, it pays for all medical expenses related to the injury—emergency care, surgery, physical therapy, medications, everything. Second, it covers rehabilitation costs if your employee needs help getting back to work. Third, it provides lost wage replacement, typically around two-thirds of the employee's regular wages while they're unable to work. And fourth, if the worst happens and an employee dies from a work-related injury, workers' comp provides death benefits to their family.
There's also an employer's liability component that protects you if an injured employee or their family sues your business. Most general contractors require at least $500,000 in employer's liability coverage, though some ask for $1 million or more.
How to Lower Your Workers' Comp Costs
The most effective way to reduce your workers' comp premium is to prevent injuries in the first place. Every claim you avoid helps keep your EMR low, which directly reduces what you pay. Invest in safety training, enforce the use of personal protective equipment, conduct regular safety meetings, and make sure your crew knows how to identify and report hazards before they become injuries.
When injuries do happen, how you handle them matters. Get injured workers medical attention immediately and document everything. Work with your insurance company to manage the claim properly, and if possible, bring injured employees back to light duty work as soon as they're able. The faster someone returns to work, the lower the claim costs, which helps your EMR.
Also, review your policy annually. Make sure your class codes are accurate and that your payroll estimates match reality. If you've overstated your payroll, you're paying more than you should. And shop around—workers' comp rates can vary significantly between insurance carriers, so it pays to compare quotes.
Getting Started with Workers' Comp
If you don't have workers' comp yet and you need it, start by contacting an insurance agent who specializes in contractor coverage. They'll help you determine which class codes apply to your business, estimate your premium based on your payroll, and find you a policy that meets your state's requirements and your clients' contract terms.
Already have coverage? Now's a good time to review it. Pull your current EMR and see where you stand. If it's above 1.0, make safety improvements a priority this year. Check that your employer's liability limits meet your general contractors' requirements—you don't want to lose a bid because you're underinsured. And ask your agent if there are any premium credits or discounts you might qualify for, like safety program discounts or deductible options that could lower your cost.
Workers' compensation for electrical contractors isn't optional, and it's not something to set and forget. Your premium, your EMR, and your coverage levels all affect your ability to win contracts and run a profitable business. Treat it as a core part of your business strategy, invest in safety, and work with an agent who understands the electrical contracting industry. It'll pay off in lower premiums and better opportunities.
