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California business insurance: requirements and costs

California sets its own workers' comp loss costs through the WCIRB rather than NCCI, and the Insurance Commissioner raised the average advisory pure premium rate 6.6% to $1.65 per $100 of payroll for policies starting on or after September 1, 2026.⁠1⁠2 Coverage is required from the first employee, and roofers and four other contractor license classes need it even with no employees.⁠3⁠9 Going without exposes an employer to stop orders, per-employee penalties and criminal charges.⁠6⁠7⁠8 Employers also withhold State Disability Insurance at 1.3% of every dollar of wages in 2026, with no wage cap.⁠12

Checked against 23 sources Last reviewed How we check figures

California at a glance

Workers’ comp required1+ employees; C-39 roofers and 4 other CSLB classes even with none
Where employers buy itPrivate insurers and a competitive state fund (State Compensation Insurance Fund)
Rates set byWorkers' Compensation Insurance Rating Bureau of California
Employer comp cost, 2023$1.43 per $100 of covered wages (US $0.98)
Comp rate index, 2024$1.86, ranked 4 of 51 (1 = most expensive)
Employer health premium, 2025$9,162 single, $27,057 family (average total premium)
Auto liability minimum30/60/15
Payroll insurance programsState Disability Insurance (SDI), including Paid Family Leave

California workers' comp is a competitive market with a state-created carrier inside it. Employers buy from a licensed insurer or from the State Compensation Insurance Fund, a not-for-profit fund the legislature set up in 1914.⁠4⁠21 Rates start with the Workers' Compensation Insurance Rating Bureau of California (WCIRB), which files advisory pure premium rates by class; the Commissioner holds a hearing and approves, rejects or modifies them.⁠2 Those pure premiums cover only expected benefits and claim-handling costs, not insurer overhead or profit, and they are advisory: each insurer sets its own rates as long as they do not threaten its solvency, are not unfairly discriminatory and do not tend to create a monopoly.⁠2 California class codes are WCIRB codes, not NCCI codes, so a classification number you find for another state may not match.

The September 1, 2026 decision gave WCIRB less than it asked for. WCIRB filed for +10.4%, an average of $1.71 per $100 of payroll. The Department's actuary found +6.6%, or $1.65, and the Commissioner adopted that figure on July 10, 2026.⁠1⁠2 The starting point was $1.55, the September 2025 benchmark of $1.52 restated for updated payroll weights.⁠2 The record explains the pressure. Accident-year combined ratios have been above 100% for six straight years, and accident year 2025 reached 129%, the highest since 2002.⁠2 Meanwhile the average rate insurers actually charged in 2025 was $1.56 per $100, below $1.58 in 2024 and $1.60 in 2023. That is 37.1% under the industry's average filed manual rate of $2.48, and the gap reflects schedule-rating and other credits now above 35%.⁠2 The Department said this calls for insurers to evaluate pricing adequacy carefully and keep underwriting discipline.⁠2 Our reading: a large 2025 credit is not something to count on at renewal.

California sits near the top of every cost measure. NASI puts employer workers' comp spending at $1.43 per $100 of covered wages in 2023, against $0.98 nationally. That is about 46% higher by our calculation, though down from $1.61 in 2019.⁠18 Oregon's 2024 premium rate ranking, which applies each state's rates to the same 50 classes, put California fourth-highest at an index of $1.86, 170% of the median state.⁠19 Neighboring Arizona ($0.70), Nevada ($0.73) and Oregon ($0.89) all ranked in the bottom half.⁠19 Group health premiums are close to the national figure: AHRQ's 2025 survey put the average single premium at $9,162 in California and $9,025 nationally. California workers paid less of it, $1,515 against $1,817.⁠20

Two changes in the last two years affect what businesses with vehicles and contractors pay. Since January 1, 2025, every auto policy issued or renewed in California must carry at least 30/60/15 liability, double the old 15/30/5 per-person limit and triple the property limit. The statute already schedules another step to 50/100/25 for policies issued or renewed on or after January 1, 2035.⁠14 For contractors, the CSLB requirement that every licensee carry comp, with or without employees, was pushed from January 1, 2026 to January 1, 2028. Until then, licensees outside the five classifications that must already carry it can still file a no-employee exemption.⁠10

For budgeting, the $1.65 benchmark is a starting point and not your rate. Pure premiums are set class by class around that average, and your insurer's loss-cost multiplier, schedule credits and experience modification all apply on top. Our calculation shows the size of the change. At the average rate, the move from $1.55 to $1.65 adds $0.10 of loss cost per $100 of payroll, or $1,000 a year on a $1 million payroll, before the insurer's expense load. Your actual change depends on your class and on whether your insurer keeps the credits it gave in 2025.⁠2

Workers’ compensation in California

Every employer with at least one employee must secure workers' comp, through an authorized insurer or a state certificate to self-insure.⁠3⁠5 Contractors licensed as C-8 concrete, C-20 HVAC, C-22 asbestos abatement, C-39 roofing or C-61/D-49 tree service must carry it even with no employees.⁠9

Who is exempt

  • Sole proprietors with no employees (they may buy a policy that covers themselves)
  • Officers and directors who fully own their corporation may elect to be excluded
  • CSLB licensees with no employees, outside the five listed classifications, may file an exemption until January 1, 2028; it must be recertified at each renewal

Buying coverage and who sets the rates

Employers buy from a licensed insurer or from the State Compensation Insurance Fund (State Fund), which competes with private carriers.⁠4 Insurers price from WCIRB advisory pure premiums by class but set their own rates and credits.⁠2

Latest rate decision (1 Sep 2026): Commissioner adopted an average advisory pure premium rate (claims cost benchmark) of $1.65 per $100 of payroll, +6.6% from $1.55, for new and renewal policies on or after Sept. 1, 2026; WCIRB had filed +10.4% ($1.71). Decision dated July 10, 2026. Official notice.

Allowed with a certificate of consent from the Director of Industrial Relations, individually or in a group. The DWC lists a net worth of at least $5 million, net income of $500,000 a year and a security deposit for individual self-insurers.⁠4⁠5

Penalties for going without

If you are uninsured, the Director of Industrial Relations must serve a stop order barring the use of employee labor, effective immediately on service. You must pay affected workers for up to 10 days of lost time.⁠6 Each stop order comes with a penalty of $1,500 per employee. If you were uninsured for more than a week in the past year, the penalty is the greater of twice the premium you should have paid or $1,500 per employee for the uninsured period.⁠7 If an injured worker's claim reaches the Appeals Board, you are also assessed $10,000 per employee if the claim is compensable or $2,000 per employee if it is not. Penalties other than the twice-premium one are capped at $100,000.⁠7 Knowingly failing to insure is a misdemeanor punishable by up to a year in county jail and a fine of up to double the premium owed, at least $10,000. A repeat conviction carries a fine of triple the premium, at least $50,000, and up to a year in jail.⁠8

What California employers pay

Employer workers’ compensation costs per $100 of covered wages, 2019–2023
YearCaliforniaUnited States
2019$1.61$1.17
2020$1.45$1.08
2021$1.34$1.01
2022$1.42$1.00
2023$1.43$0.98

Employer cost per $100 of covered wages: premiums paid by insured employers plus benefits and administrative costs of self-insured employers, divided by the wages of workers covered by workers’ compensation. The United States figure is NASI’s national total, which includes federal programs. Source: National Academy of Social Insurance (NASI), published 11 Aug 2026.

Oregon’s biennial comparison of workers’ comp rates puts California’s index for rates in effect on 1 January 2024 at $1.86 per $100 of payroll, 70% above the national median of $1.09 (rank 4 of 51, where 1 is the most expensive). The index prices the same 50 risk classes, weighted by Oregon payroll, in every state, so it compares rate levels rather than what employers actually pay. Compare every state.

Disability and paid leave insurance

California runs a payroll-funded program that employers must register for, fund or insure on top of workers’ compensation.

California disability and paid leave programs, 2026
Program2026 contributionEmployer’s part
State Disability Insurance (SDI), including Paid Family Leave1.3% of all wages in 2026, no wage cap since Jan. 1, 2024⁠12No employer contribution; employers must withhold SDI from employees' wages and remit it to the EDD.⁠13

SDI pays benefits for non-work illness, injury and pregnancy, and also funds Paid Family Leave.

Employer health insurance in California

Average annual premium per enrolled employee at private-sector employers, 2025
MeasureCaliforniaFirms under 50United States
Single coverage, total premium$9,162$9,149$9,025
Family coverage, total premium$27,057$23,389$26,281
Employee share, single$1,515–$1,817
Employers offering coverage47.8%35.1%49.2%

Average total annual premium per enrolled employee at private-sector establishments that offer health insurance; the offer rate is the share of establishments offering coverage. Small firms have fewer than 50 employees. Source: Agency for Healthcare Research and Quality (AHRQ), Center for Financing, Access and Cost Trends, 2025 survey year. All states.

Commercial auto in California

Every vehicle registered in California, including business vehicles, must carry at least 30/60/15 in liability limits (bodily injury per person / per accident / property damage, in thousands of dollars). Official source.

Raised from 15/30/5 for policies issued or renewed on or after Jan. 1, 2025 (SB 1107). The DMV applies the same minimums to private passenger, commercial and fleet vehicles. The statute adds $20,000/$40,000/$10,000 (to 50/100/25) for policies issued or renewed on or after Jan. 1, 2035.

Trucks and buses used in interstate commerce must also meet federal minimums of $750,000 to $5 million: see commercial auto minimums and what commercial auto costs.

Other California rules that affect insurance costs

Contractor licenses and workers' comp

CSLB will not keep a license active without proof of comp or a filed exemption. C-8, C-20, C-22, C-39 and C-61/D-49 licensees cannot use the exemption.⁠9 An exemption is void as soon as you hire, and CSLB must receive proof of coverage within 90 days of the hire.⁠9 Exempt licensees must recertify at every renewal or the license will not renew.⁠11 SB 1455 delayed the all-licensee comp requirement to January 1, 2028 and gave CSLB until January 1, 2027 to set up a process for verifying no-employee exemptions.⁠10⁠22 Contractors with no employees should budget for a policy from that date.

Prop 103 prior approval for most other lines

Proposition 103 requires insurers to file a full rate application with the Commissioner before changing a rate. The public is notified and consumers can request a hearing; for a commercial-lines increase above 15%, the Commissioner must hold one on a timely request. No rate may stand that is excessive, inadequate or unfairly discriminatory.⁠16 It applies to all insurance on California risks except the lines listed in Insurance Code 1851, which include workers' comp, disability, life, title and ocean marine.⁠17⁠23 Workers' comp works differently: the Commissioner sets only an advisory benchmark, and insurers choose their own rates.⁠2

California compared with its neighbors

Workers’ comp and health insurance costs, California and neighboring states
California$1.43$1.86$9,162
Oregon$0.97$0.89$9,225
Nevada$0.87$0.73$8,215
Arizona$0.62$0.70$7,734

Sources

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  22. 22
  23. 23

National figures: NASI (employer comp costs), Oregon DCBS (rate index), AHRQ MEPS-IC (health premiums).

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Other states

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