How to Buy Workers Compensation Insurance in Pennsylvania

Step 1: Determine Your Class Code(s)

Every PA workers' comp policy is rated by class code — the PCRB's system for categorizing work activities by injury risk. Before getting quotes, identify which class code(s) apply to your employees' actual job duties.

Key rules for class code assignment:

• Codes are assigned based on what employees actually do, not your business name or entity type
• If employees perform multiple types of work, payroll can often be split between codes
• Clerical and outside sales employees can often be coded separately (Code 953, 991) at much lower rates
• Using the wrong code — even accidentally — can result in audit surcharges at year-end

Use the PA class code directory to identify your codes. Or consult a licensed broker who specializes in workers' comp.

Step 2: Estimate Your Payroll

Workers' comp premium is calculated per $100 of annual payroll. Your estimate should include:

• All W-2 wages paid to employees (gross pay)
• Bonuses and commissions (generally included)
• Overtime premium above straight-time rate may be excluded in some cases
• Exclude: tips (employee-reported), payments to independent contractors

Use our free calculator to get a cost estimate based on your payroll and class code. This gives you a benchmark before shopping carriers.

Step 3: Choose Your Purchasing Channel

Option A: Independent Insurance Agent (Recommended)

An independent agent represents multiple carriers and can shop your risk to find the best LCM for your class code. A specialist who focuses on workers' comp will know which carriers are competitive for your industry and can advise on class code accuracy.

Benefits:

• Access to multiple carriers simultaneously
• Expert advice on class code assignment and payroll allocation
• Assistance with audit disputes and EMR challenges
• No cost to you — agents are compensated by the carrier

Option B: Direct from a Single Carrier

Some carriers sell directly. This is generally only competitive if you know the carrier has the best LCM for your specific class code — which requires market knowledge you may not have. Usually not the best option without shopping comparisons.

Option C: State Workers' Insurance Fund (SWIF)

SWIF is Pennsylvania's insurer of last resort. It is required by law to cover any PA employer — it cannot deny coverage based on industry, loss history, or risk profile. SWIF rates are typically 10–40% higher than competitive private market rates, but it provides a guaranteed option for:

• Very high-hazard industries that private carriers won't write
• Businesses with high EMRs that make private market coverage expensive or unavailable
• New businesses in high-hazard classes with no prior coverage history

Step 4: Get at Least 3 Quotes

LCMs vary significantly between carriers for the same class code. Getting 3+ quotes is the single most effective way to reduce your premium. Differences of 20–35% between carriers for identical risk are common.

When comparing quotes, verify that all carriers are using the same:

• Class codes and payroll figures
• Experience modifier (EMR) — all quotes should use the same PCRB-calculated EMR
• Employer liability limits

A low quoted premium that uses a different class code may result in a large audit adjustment at year-end. Make sure you're comparing apples to apples.

Step 5: Review and Bind Coverage

When you've selected a carrier:

• Review the policy declarations for class codes, payroll estimates, and premium
• Confirm the effective date — coverage must be in place before employees work
• Understand your payment options: annual, semi-annual, monthly, or pay-as-you-go
• Receive your certificate of insurance (COI) and workers' comp posting notice (LIBC-500)
• Post the LIBC-500 in a visible location at every worksite

Step 6: Prepare for the Annual Audit

Most workers' comp policies include an annual audit where the carrier verifies your actual payroll against the estimated payroll used at inception. If your actual payroll was higher, you owe additional premium. If lower, you receive a refund.

To prepare:

• Keep accurate payroll records by class code throughout the year
• Document the split between higher-hazard and clerical/outside-sales work
• If you have subcontractors, keep their certificates of insurance — without them, subs may be treated as your employees in the audit