Make Sure Your Small Business isn’t Behind on Workers Comp Coverage

It just takes one incident in your workplace to change your financial future for years to come. For those small businesses who try and skirt the laws regarding workers compensation insurance, it is always better to be safe than sorry.

Whether you are preparing to open a small business or have one already underway, the importance of having the proper workers comp coverage cannot be emphasized enough.

As the laws state (except in Texas), all employers that have at minimum one employee must carry workers comp protection. It is not uncommon to read about businesses being fined and even worse should they not be properly covered. For those small businesses that play by the rules, however, affordable and solid comp coverage is available when you know what to look for.

The bottom line with workers comp coverage is that when an employee turns in a claim through a company’s comp policy, the worker’s medical treatment is compensated by the business owner’s insurer. Oftentimes, the insurer also reimburses the employee for a portion of lost compensation as a result of a work-induced illness or injury that took place on the job.

If you’re planning to open a small business soon or recently opened and are not up to speed on your coverage needs, take these factors into consideration:

• How the premium is determined – What a small business owner pays for their workers comp coverage is largely in part decided due to their employment classification. The National Council on Compensation Insurance (NCCI), for the most part has the say on the classifications, which are in turn used by underwriters in the majority of states;
• Riskier the job, higher the premium – As it stands to reason, premiums tend to be higher for those positions where more risk is involved. Typically, an employer’s premium is tabulated by multiplying the rate of classification by their payroll compensation. In most scenarios, underwriters will use the base pay to come up with a rate;
• Take into account the experience modification rate (EMR) – The EMR looks at the annual losses suffered by a company in insurance claims versus similar sized businesses. The typical EMR average is 1, with a company being over or below the average adjusted for;
• Review your policy regularly – Like any other important insurance documents that may your company (auto, renters, health, etc.), it is important to review your workers comp plan on a regular basis, especially when there are significant changes in your number of employees and/or alterations to your company’s operations;
• Shop around for quotes – If you’re preparing to add workers compensation coverage to your company or desire better pricing and/or coverage, be sure you shop around for multiple quotes. Don’t always just settle for the first quote that comes your way, given the fact you may miss out on a good deal.
• Ways to reduce costs – With a little time and effort, you can possibly reduce what your company pays for workers comp coverage. There is the possibility of self-insuring as opposed to acquiring coverage via the state or private sector. In some cases, small businesses sporting a rather low risk degree can team up and invest in a pool of workers comp insurance funds.

Whether it is a brand new policy or renegotiating a current one, take the time as a small business owner to work for the right compensation coverage plan for your employees and your company.