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Buy an individual, annual premium policy for your business and pay for a year of coverage in cash, up front

You can try to purchase your own policy from most insurance agencies that sell commercial insurance like general liability, property & casualty, and commercial vehicle coverage. However, you will find that most workers compensation insurance companies feel that it is unprofitable for them to take on a risk of a very expensive on the job injury, in return for a small premium of a few thousand dollars each year. An individual WC policy for a small company, with a small number of employees and a small annual premium has always been very difficult, if not impossible to buy.

If you are able to find a WC company that will issue you your own policy, you will be required to estimate your gross payroll for 12 months, which is often difficult to do, and pay an annual premium up front, which is usually a financial burden. Then at the end of each policy year they will audit your books to determine if your actual payroll was more than your estimated payroll, which usually results in more premiums due immediately.

If you incur an on the job injury that costs the insurance company more than your annual premium, they will want to cancel you, raise your rates, or not renew your policy.

Buy workers’ compensation insurance coverage for your business and pay as you go on a payroll by payroll basis

You can purchase your coverage through me with no down payment; you just pay as you go. The insurance company will be a large and financially sound company that is almost as well-known as Coke. Many commercial and government agencies will require you to get workers compensation insurance from a highly rated company, not the Night Life Insurance Company of Texas.

Certificates of Workers’ Compensation Insurance

Most commercial and government agencies will not accept a workers compensation exemption certificate and will require you to provide them with a “Certificate of Workers Compensation Insurance”, which is proof of coverage. The certificates are immediately issued by your insurance company upon your request and show their name, your company name as the insured, your policy number, when your policy coverage period starts and ends, and it shows the name of your customer (the certificate holder), and their address and fax number. Your certificate usually states: “This policy covers all of the employees of the XYZ Company, including the owners and if for any reason we intend to cancel this policy, we promise to give you 30 days written notice beforehand.” So your customer doesn’t have to worry about whether your policy is in force or not when you are doing work for them in the future. (Please note that it says “employees” not 1099 workers, not independent contractors, not subcontractors.)

Pay as you go through a PEO

Pay as you go coverage has several benefits for the insurance company. Most pay as you go coverage has small annual premiums of less than $12000 and require you to use a payroll processing service that gives the insurance company your accurate, actual payroll every pay period which they use to calculate your actual premium due them. Your payroll processing service will collect the workers compensation premium each payroll period for the insurance company and send all premiums collected to your insurance company. This eliminates the need and expense of the insurance company having to collect your premiums and audit your books at the end of each policy year.

Your payroll checks are prepared and sent to you overnight by FedEx. They also timely file all payroll tax forms with the State and Federal government for you, which eliminates late penalties and interest charges.

Pay as you go has several benefits for you. You pay no down payment, no interest to finance your annual premium, you pay for the insurance after you have had the coverage, not in advance, and you don’t have to “estimate” your gross payroll a year in advance and go through an insurance company audit of your books every year to see if your actual payroll was more or less than your estimated payroll. At almost every audit, most of the time you wind up with a big additional premium due in cash immediately. The best surprise is NO surprise!

You just contact our processing center each pay period and report your payroll by noon, the day before you want your payroll delivered to your door. On the date your paychecks are dated, they will debit your company bank account to cover your payroll taxes: FICA (matching social security), FUTA (federal unemployment) & SUTA (state unemployment taxes) which they send to the government for you with all paperwork the government requires of you. They also collect your workers comp premium for that payroll only. Finally, they collect their small administrative fee to do everything for you.

This option can work if you only need or want workers comp coverage and certificates during part of each year or on a job by job basis as opposed to full-time coverage.


All workers’ compensation insurance premiums are equal to a% of the gross payroll of each employee. Jobs with a higher risk of injury have a larger premium%, than say, a clerical worker. Most of my providers require a company to have a minimum gross payroll of $500 per week. If you have no payroll now, you will need to start paying yourself a $500 per week salary. (I have one company that will allow your gross payroll to be as little as $322 per week, which is minimum wage for 40 hours of work.)

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