How to Buy Workers’ Comp Insurance

A workers’ compensation policy is a vital protection for just about any business with employees. It may even be required for you to carry. It can be kind of tricky to figure out how to purchase it, so it may be helpful to learn what you actually need to know to shop for this coverage in a smart way.

Legal Compliance

It is best to start by understanding state requirements. Since this coverage is governed at state level, it is smart to review those regulations as that will dictate the policy your employees must be covered with. The number of employees you have will be the indication whether you’re required to carry workers’ compensation insurance. Even if coverage is not required for the number of employees you have, it is still benenfical even with one employee. You are legally required to comply with all states where your employees are performing work. Policies only cover within state lines so inquire upon multi-state coverage if applicable. Also, keep in mind that workers’ comp only covers employee injuries that occured while on the job. A general liability policy will offer a broader coverage.

Payroll Management

Payroll fluctuates over time and there are a variety of processes for different employee types. An agent can help you determine annual payroll based on your current circumstances. At the end of the year, you can conduct an audit on the actual payroll, and your insurer can then issue a credit or bill as needed. You can slowly improve cash flow by monitoring and reporting payroll throughout the year so that coverage may be adjusted accordingly.

Reference Existing Policies

If you have an existing workers’ comp policy, have this handy to reference the information on the policy for a smoother, faster process. Information you will likely need to access: Class Codes A breakdown of your employees’ job descriptions that your insurer can use to calculate premiums, and confirm they are correct.

Experience Modifier

Depending on the age of your business, you may or may not have this number that takes into account your claims history. Comparing you to the average, you will receive a mandatory debit or credit on your premium.

Loss Runs

Complex business with higher premiums will require “loss runs”. These are claims reports showing all claims that you have taken care of within a specific time period.

Do You Qualify for Discounts?

You may be able to help keep premium costs down by asking about discounts and credits, such as:

Workplace safety programs

Speak to your agent about a reward for a formal safety program.

Formal training programs

Formal safety training programs may credit you on your policy.

Owner exceptions

You may be able to opt out from covering yourself which will reduce your premium.

Payment plans

Ask about payment plans, as paying in larger increments will reduce the final billing fees for each payment which add up and can make a difference for smaller businesses.

Payroll reporting

Pay a more accurate premium by reporting company payroll on a monthly basis.

Annual Audit and Policy Review

Insurers conduct an audit at the end of each year with the policy and you can then decide to renew your policy or switch to another carrier. Regardless of your route, it is crucial to carefully review your audit and policy. It is in your best interest to double-check your audit for any possible errors to correct. Also, use this time to update your policy. If there have been any changes to business model, size, geographic market or payroll within the past year, be sure to address that for the new policy.

Determining Correct Class Code

You will need to be certain of the correct class code when purchasing coverage. These are the numbers assigned by the state to a specific job duty so you can accurately classify employees. Choosing the right one can be complex so have a workers’ compensation insurance expert evaluate the responsibilities of your workers and assist you in ensuring your business is classified accurately. Your premium will be based on these classification codes, the risk associated with each employee group and the total employee payroll. Along with learning how to properly group employees, it is important to have clear descriptions of roles within your company so that it is easier for agents to classify your employees accurately. It is most important to work with a worker's compensation  agent that truly understands state systems, how to accurately classify your workforce and secure protection that is best fit for your business.

About David G. Sayles Insurance Services

At David G. Sayles Insurance Services, we help our clients decide which of these options is best for them based on their current situation and risk factors.  Contact us at 1-855-977-1842 or insureme@dsayles.mysites.io for a consultation!