It's required in every state except Texas, and specifics vary from state to state. Not every employer needs workers compensation insurance, in some states, small companies with fewer than three to five employees don't. Many states also give the employer the option to self-insure, that is, to cover the costs flowing from on the job injuries themselves.

The cost of workers compensation insurance is determined by the workers compensation board in your state. Although base rates vary slightly from state to state, the basic process each state uses to calculate base rates is similar. Each type of occupation is assigned a risk classification. Risk is determined by two factors: the frequency of on-the-job injury and the severity of injury. Severity is measured by both medical payments and indemnity benefits