Workers comp

Definition

State-required cover for employee injuries, priced per $100 of payroll.

Why It Matters

Most states make it mandatory once a business has employees, but the line is each state's own: Texas leaves it to the employer, and Florida starts at four employees outside construction and one inside it. A lapse where it is required is personal exposure plus penalties, and Florida adds a stop-work order and a penalty of twice the premium that went unpaid. The premium is a class code rate times payroll times a multiplier set by the claims the business has had. That multiplier can follow the business across a sale, so a seller's history can price your first year whether or not you keep their carrier. Get the loss runs in diligence and have your own policy bound for day one, beside the liability cover.

In numbers: A $600,000 payroll in a class rated $4.50 per $100 runs about $27,000 a year at a neutral modifier, and a 1.3 modifier inherited from the seller's claims lifts it to roughly $35,000.