In 2025, workers' comp for mechanics costs about $93 per month per employee, or $2.15 per $100 of payroll. This insurance covers work-related injuries or illnesses, protecting both your employees and your auto shop from financial loss.
What is the Mechanic Workers' Comp Premium based on?
Your exact workers' comp premium depends on a few key factors, such as:
Your Industry
Workers' comp costs vary depending on industry risk levels. The National Council on Compensation Insurance (NCCI) assigns a four-digit class code to each type of job, along with a corresponding risk rating based on the likelihood and severity of injuries.
Industries like automotive repair or towing tend to have higher workers' comp rates due to the nature of the work, which involves more physical and potentially hazardous tasks, compared to lower-risk industries such as office work.
Most mechanic businesses are classified under class code 8380, which covers the repair and maintenance of vehicles and heavy machinery and has a rate of $2.15 per $100 of payroll.
If your business focuses more on auto body repair rather than mechanics, you may fall under class code 8393—a lower-risk classification with lower rates averaging $1.54 per $100 of payroll.
On the other hand, the workers’ comp rate for towing services (class code 7225) is much higher, averaging $6.79 per $100 of payroll due to the increased risk level.
For more details, check out our Guide to Mechanic Workers’ Comp Codes.
Your Payroll
Your premium is calculated based on total payroll. The more employees you have, the higher your premium, as a larger team increases the potential for accidents.
Claims History
If your auto shop has a history of frequent accidents or claims, your premium will likely be higher. On the other hand, a lower number of claims may lower your rates over time.
How are Mechanic Workers' Comp Premiums calculated?
Here’s a basic formula to calculate your workers' comp premium:
Payroll divided by 100 x rate = Premium
Step 1: Calculate Payroll
First, figure out the total annual payroll for all mechanics on your team.
If you don’t have yearly figures handy, you can estimate by taking each mechanic’s hourly pay and multiplying it by their weekly hours and the number of weeks they work in a year.
Step 2: Find your Rate
Find the workers' comp rate for your industry and state:
- You can use the national average: Code 8380 is $2.15
- Or refer to your current policy for your exact rate
Example Calculation
Imagine you own an auto mechanic shop in Maine. You employ seven mechanics and two office staff members (classified as clerical), and you, the business owner, are excluded from coverage.
To ensure your business and employees are protected, you need a mechanic’s workers’ comp policy.
Here’s how to calculate the annual premium:
Step 1: Calculate Payroll
- Mechanics: Each mechanic earns $25 per hour. Calculate the annual payroll:
$25 an hour x 40 hours a week x 52 weeks = $52,000 per mechanic
Total payroll for 7 mechanics: $52,000 x 7 = $364,000.
- Clerical staff: Each office employee earns $19 an hour x 40 hours a week x 52 weeks = $39,520.
Total payroll for 2 office staff members: $39,520 x 2 = $79,040.
Step 2: Find your Rates:
- Your plumbers fall under class code 8380 with a Maine rate of $2.48.
- Your office employee falls under class code 8810 with Maine’s rate of $0.14.
Step 3: Apply the Formula
For the mechanics (class code 8380):
- Payroll: $364,000
- Premium Calculation: $364,000 ÷ 100 x $2.48 = $9,027.20
For the clerical employees (class code 8810):
- Payroll: $79,040
- Premium Calculation: $79,040 ÷ 100 x $0.14 = $110.66
Total Estimated Annual Premium: $9,027.20 + $110.66 = $9,137.86
This estimate may vary based on additional factors, such as state regulations and available discounts.
Annual Cost of Workers' Comp for Mechanics (Class Code 8380)
To give you a rough idea, here’s an estimate of average costs per mechanic for a few states.
Does it matter where you buy a Policy?
When choosing a workers' comp policy for your mechanic business or auto shop, cost is one factor, but it’s not the only one. The reliability of the insurance provider, the speed with which they process claims, and their level of customer service are equally important.
Choosing an insurance company experienced in the automotive repair industry ensures that your employees can receive quick assistance if they’re injured on the job.
What does Workers' Comp Insurance cover?
Workers' comp insurance offers a range of coverages for work-related injuries or illnesses:
- Medical Expenses: Pays for treatment related to workplace injuries or illnesses
- Lost Wages: Compensates employees while they recover
- Death Benefits: Provides financial support to families if an employee loses their life due to a job-related incident
- Lawsuit Protection: Shields your business from legal action related to workplace injuries
Tips to Lower your Workers' Comp Premium
If you’re looking to reduce your workers' comp costs for your auto shop, here are some practical tips:
- Implement a Safety Program: Working with heavy parts and tools makes safety training essential. Show your underwriter you’re serious by holding regular training on safe lifting, tool use, and handling chemicals. These steps can help keep premiums down.
- Maintain Equipment: Regularly check and maintain lifts, tools, and machinery. Well-kept equipment reduces accidents and shows insurance companies that your shop is focused on safety.
- Ensure Correct Class Codes: Make sure all roles are properly classified. Mistakes can raise premiums and lead to penalties.
- Ask About Discounts: Some companies offer discounts for shops with a strong safety record. Fewer claims could qualify your business for savings.
- Reduce Claims: Fewer claims mean lower premiums over time. Invest in slip-resistant mats and clear walkways to prevent slips and falls in the shop.
Find Out Your Mechanics’ Workers' Comp Costs
Curious about the exact cost for your auto shop? Use our online tool for a tailored quote and see how much you could save!
Note: The information provided in this blog is intended for general informational purposes only and is not a substitute for professional legal or insurance advice. Laws and regulations regarding workers' compensation insurance are complex and vary by state and by specific circumstances. Therefore, readers are encouraged to consult with a qualified legal or insurance professional to obtain advice with respect to any particular issue or problem they might have.
Mordechai Kamenetsky, co-founder and lead agent of Kickstand, is recognized as an expert in workers' compensation. He is passionate about helping small businesses manage risks and lower their workers' comp costs. In his articles, he educates readers and clients on the intricacies of workers' comp insurance.
The question people ask us most often is, “Does my business need workers comp?” This often leads to the second-to-most frequently asked question: ”Do owners need workers comp?”
