Jane Dotson
Workers' compensation insurance provides medical and wage benefits to employees injured at work and is required for most businesses in most states. The cost of workers' compensation insurance varies depending on the state and industry. In Colorado, workers' compensation insurance is required for all employers, regardless of the number of employees or whether they are part-time or family members. The National Council on Compensation Insurance (NCCI) collects data on workers' compensation claims and publishes loss costs that form the basis for all workers' compensation insurance rates in the state. The Colorado Division of Insurance (DOI) has approved an average reduction of 4.3% for 2025, marking the eleventh consecutive year without an increase.
| Characteristics | Values |
|---|---|
| Who needs workers' compensation insurance | All employers operating in Colorado with one or more employees, including part-time, full-time, and family members |
| Exemptions | Independent contractors and certain occupations listed on the Independent Contractors and Coverage Exemptions page |
| Consequences of non-compliance | Fines of up to $500 per day of non-compliance, business shutdown, and full liability for injury claims |
| Additional requirements | Businesses in the construction industry have additional insurance requirements |
| Cost calculation factors | State, industry, location, claims history, number of employees, medical expenses, cost of living, and industry risk |
| Cost reduction | Maintaining a safe workplace to minimize injuries and claims can help reduce costs |
| Colorado-specific information | All insurers in Colorado use NCCI loss costs as a base, with insurers' expenses added to determine the final rate |
| Recent trends | Colorado has seen an 11-year cumulative average decrease of 53.5% in loss costs, with a 4.3% reduction for 2025 |
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What You'll Learn
Workers' compensation insurance requirements in Colorado
Workers' compensation insurance is required for all employers operating in Colorado. This applies to all businesses with employees, regardless of the number of employees, whether they are part-time, full-time, or family members. There are, however, a few limited exceptions, which are listed on the Independent Contractors and Coverage Exemptions page.
If a business does not have workers' compensation insurance, they may face fines of up to $500 for every day they are uninsured, and their business may be shut down. If an employee is injured while the employer is uninsured, they will have to pay for the claim themselves, plus an additional penalty of 25% of the injured employee's benefits.
Businesses in Colorado can obtain workers' compensation coverage through commercial insurance or self-insurance. Over 500 licensed insurance companies can provide coverage, and Pinnacol Assurance is required to provide coverage for any Colorado employer.
There are additional insurance requirements for businesses in the construction industry. If a business uses contractors, they must ensure that these contractors also meet the workers' compensation requirements. They can either provide insurance to their contractors and charge them for their portion of the premium or obtain proof of workers' compensation compliance. This proof can come in the form of proof of insurance or proof of rejection of coverage.
When filing a workers' compensation claim in Colorado, there are specific timelines that both employees and employers must follow. Employees have four days to report work-related injuries to their employers, and employers have ten days to report the injury to their insurer. Once a claim is filed, the insurer has 20 days to respond.
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The National Council on Compensation Insurance (NCCI)
In the United States, the National Council on Compensation Insurance (NCCI) is the trusted source of information on workers' compensation. The NCCI collects and analyzes workers' compensation insurance data and provides rate recommendations. It also evaluates legislative proposals and supports the administration of state workers' compensation systems. Headquartered in Boca Raton, Florida, the NCCI is overseen by a board of directors representing affiliated insurers and other stakeholders.
The NCCI is described by the U.S. Department of Labor as managing the country's largest database of workers' compensation insurance information. It provides manuals to help determine workers' compensation insurance premiums, including the Basic Manual, Experience Rating Manual, and Scopes Manual. The NCCI calculates experience modification factors using employer loss and payroll data reported by insurers in the states where it operates.
In its "2025 State of the Line" report, the NCCI stated that U.S. workers' compensation net premium fell by 3% in 2024, with a combined ratio of 86, the same as in 2023. The NCCI also reported a 5% decline in lost-time claim frequency and a 6% increase in medical and indemnity claim severity in 2024.
In 2024, the NCCI recommended reductions in workers' compensation premium rates across multiple U.S. states. These recommendations were based on national trends, including reduced claims severity, improved workplace safety, better hiring practices, strategies to return injured employees to work, and increased investment in employer safety programs. For example, in Connecticut, the NCCI's filing was approved by the state's insurance regulator.
In Colorado, workers' compensation insurance is required for all employers, regardless of the number of employees or whether they are part-time or family members. The construction industry has additional insurance requirements. Employers who do not have workers' compensation insurance can be fined up to $500 per day and may be subject to business shutdowns. If an employee is injured while the employer is uninsured, the employer must pay for the claim and an additional penalty of 25% of the injured employee's benefits.
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Loss costs and premium rates
In Colorado, workers' compensation insurance is mandatory for all employers, regardless of the number of employees or the nature of their employment (part-time, full-time, family members, etc.). The insurance provides medical and lost wage benefits to workers who are injured on the job.
The National Council on Compensation Insurance (NCCI), a private company that gathers workers' compensation data, analyzes trends, and makes rate recommendations, serves as the basis for workers' compensation insurance loss costs in Colorado. The NCCI's loss costs are adjusted by each insurer's own expenses to arrive at the final rates charged to employers.
The average loss costs component is calculated as the average of changes across all worker classifications within specific industries, including manufacturing, contracting, office/clerical, and goods and services. The Colorado Division of Insurance (DOI), part of the Department of Regulatory Agencies (DORA), approved a reduction of 4.3% for 2025, marking the eleventh consecutive year without an increase. This reduction in loss costs helps lower expenses for Colorado employers, incentivizing them to prioritize workplace safety.
Factors that influence workers' compensation costs include the frequency and severity of injuries, the duration and number of treatments for each claim, increasing medical costs, and overall costs to cover workers' compensation claims. Additionally, industry risks and changes in state laws related to covered benefits or medical costs can impact a state's employer costs. While Colorado does not have a regulated rate, employers can expect their workers' compensation insurance rates to be influenced by these factors and the NCCI's recommendations.
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Additional insurance requirements for construction businesses
In Colorado, workers' compensation insurance is required for all employers, regardless of the number of employees or whether they are part-time or family members. The state also has additional insurance requirements for businesses in the construction industry. Construction businesses must carry a policy for their employees, and if they use contractors, those contractors must also meet workers' compensation requirements. Failure to carry insurance could result in fines for the business.
Construction is a risky and litigious industry, and insurance can help mitigate the risks for builders and owners. There are several types of insurance policies available to protect construction businesses, including:
- Commercial auto insurance for business-owned vehicles. This includes coverage for specific types of vehicles commonly used during construction projects, such as commercial trucks, dump trucks, semi-trucks, and cement mixers.
- Builder's risk insurance (also known as course of construction insurance) covers the costs of damage to a building or structure while it is under construction.
- General liability insurance protects against common risks in the construction industry, including medical bills and property repair or replacement costs.
- Pollution liability insurance covers claims for bodily injury and property damage caused by hazardous waste or materials released during a company's operations.
- Subcontractor default insurance (SDI) protects a contractor if one of their subcontractors fails to perform according to their agreement.
- Contractor license bonds are similar to insurance policies and guarantee that a contractor will comply with the regulations that apply to their license. These bonds protect the general public and anyone doing business with the contractor.
The specific insurance requirements for a construction business can vary depending on the state, industry, and type of construction contracts. It is important for construction businesses to review the different types of insurance policies available and select the appropriate coverage to protect their business and projects.
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Exemptions to workers' compensation insurance
Workers' compensation insurance is required for all employers in Colorado, with a few limited exceptions. The most common exemption is for independent contractors, although they have specific requirements. If a business hires a contractor who fails to carry workers' compensation and their employee is injured, the business could be held responsible. Therefore, it is always recommended to verify that contractors are meeting workers' compensation requirements.
Contractors can be identified as individuals who are both free from direction and control while performing their work and own and operate an independent business that does that kind of work. If a contractor does not meet these criteria, they are considered employees. In Colorado, all workers are "considered employees unless proven otherwise".
Other exemptions to workers' compensation insurance in Colorado include:
- Domestic workers who work less than 40 hours per week and less than 5 days per week.
- Self-employed or sole proprietors are not required to purchase workers' compensation insurance unless they are in the construction industry. In this case, they must either purchase insurance or reject coverage.
- Individuals can reject coverage if they own at least 10% of the company and are a president, vice-president, secretary, treasurer, chairman of the board, or an LLC member.
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Frequently asked questions
Workers' compensation insurance provides medical and lost wage benefits to workers who are injured on the job. All businesses with employees operating in Colorado are required to have workers’ compensation insurance.
If you do not have workers' compensation insurance in Colorado, you can be fined up to $500 for every day you are uninsured. Your business may also be shut down. If one of your employees is hurt while you are uninsured, you will have to pay for the claim yourself, plus an additional penalty of 25% of the injured worker's benefits.
The cost of workers' compensation insurance varies depending on several factors, including the state where the business is located. In 2021, the average cost of workers' comp per $100 of payroll ranged from $0.35 to $1.83 across different states. Colorado has seen an 11-year cumulative average decrease of 53.5% in workers' compensation insurance loss costs, with a further 4.3% reduction for 2025.
The National Council on Compensation Insurance (NCCI) collects data on workers' compensation claims and publishes loss costs that form the basis for insurance rates. Insurers in Colorado use NCCI loss costs as a base and add their own expenses to arrive at the final rates charged to employers. You can refer to the NCCI filing and the Colorado Insurance Commissioner's final order of approval for the upcoming year's premium rates.
Yes, Colorado has additional insurance requirements for businesses in the construction industry. If you use contractors for construction work, you must ensure they meet the workers' compensation requirements. You can either provide them with insurance coverage or obtain proof of their compliance or rejection of coverage.
