Workers Compensation Insurance

Workers Compensation Insurance

Workers compensation insurance differs from most other forms of business liability insurance because it is specifically designed to cover insurance claims by employees in the event they are injured on the job. It does not provide third-party insurance coverage like most other types of liability insurance. The function of workers compensation insurance is to insure a business against employee claims for accidents, injuries and occupational hazards related to the work performed. Workers compensation will pay for employee medical costs, disabilities and lost wages related to on-the-job injuries and accidents.
 Workers compensation is employers liability coverage for injured workers. 
The biggest benefit to having workers comp insurance is that most state laws prohibit employees from filing a legal claim for damages against their employer when work comp coverage is purchased and in force. This legal concept is known as exclusive remedy. The laws surrounding exclusive remedy came into effect in the beginning of the twentieth century as a means of dealing with the issue of injured workers. Historically, an employee would have to file a civil suit against their employer and then prove the cause of injury was due to employer negligence. Under exclusive remedy rules, injured employees receive quick access to medical treatment and a reasonable replacement for lost wages; however, they are not allowed to file suit against their employer unless they can prove the employer was willfully negligent or malicious.

Why Do Employers Need Workers’ Comp?

Most states require employers to obtain workers compensation insurance for their business if they have one or more employees. Aside from general liability insurance, workers compensation is the most often purchased insurance product for businesses. Employers that do not purchase workers comp insurance will be held financially liable for nearly all work-related claims. Additionally, employees are allowed to file a civil suit for punitive damages and most states will impose additional penalties and fines on the employer.
Workers compensation is employers liability coverage for injured workers.


How to Buy Workers Compensation Insurance

Workers comp insurance is a relatively easy product to buy, but the cost of coverage varies significantly between class codes. There are over 700 workers compensation classification codes actively utilized under the National Council on Compensation Insurance (NCCI) guidelines. Each class code signifies a separate job function, or scope of operation. Insurance companies are free to rate each class code separately, and common sense dictates that lower risk classifications, such as clerical or sales, will be less expensive than higher risk job classes, such as construction or manufacturing.

Workers’ compensation rates can vary significantly between insurance companies depending on their historical loss experience and appetite for each particular class code.

A workers compensation premium is determined by a company’s payroll. An estimated payroll for the policy period is utilized and assigned to each class code listed on the policy. The payroll is divided by $100 and multiplied by the assigned rate for the classification code. For example, let’s assume you have $25,000 in payroll for a small daycare business. Let’s estimate the rate for that class code is $3.00 per $100; divide $25,000 by $100 (product $250); now multiply $250 by the rate: ($250 x $3.00 = $750.00). The cost of the insurance for the daycare would be $750.00, plus any taxes, policy fees or surcharges.

The trick to buying affordable workers compensation insurance is finding an insurance carrier with a low rate for your industry. Not all insurance companies are looking to write every type of business. When they do want to quote your business, they will often offer lower rates, more policy credits, and extra premium discounts. You need an agency who has a wide array of insurance carriers looking to expand their book of business.

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General Liability Shop.com offers workers compensation insurance from more than 35 insurance companies. Contact our business insurance Specialists today at 800-900-8657. Or start your workers comp quote here online.

General Liability and Workers’ Comp Insurance

General liability and workers compensation insurance are the two most commonly purchased insurance products by business owners in the U.S. While a lot of insurance companies don’t always offer the most competitive rates on both lines, there are still several advantages to purchasing both lines from the same insurance company and agency. Unlike a business owners policy, or a commercial package policy, where multiple lines of insurance are purchased under a common policy form, workers compensation insurance is always written as a separate insurance policy.

Workers comp insurance is never included on a BOP. Employers either need to quote workers comp separately or have it quoted as part of a commercial insurance package (CPP).

Learn more about a Commercial Insurance Package.

Most insurance carriers offer additional policy credits on one or both policies when a business buys general liability insurance and workers compensation insurance coverage from the carrier. We’re often able to get between 10 and 15 percent off the total cost of premium. Consider purchasing general liability and workers compensation together to get the best possible pricing on business insurance.

Workers Compensation Rates Vary by State

Workers compensation insurance rates can vary tremendously from state to state; more so than any other line of business insurance. Part of the driving force behind state rates has to do with state rules and regulations. Some state laws favor employees and some state laws favor employers. These regulations have a significant impact on both the cost and likelihood of workers comp claims.

Additional variables that affect class code rates include a) the cost of medical treatment, b) the average wages in the state, c) the frequency and severity of historical claims per classification code and d) the overall profitability of insurance companies within the state.
Business owners generally need both workers compensation and general liability insurance.


Pay As You Go Workers Compensation

Pas As You Go workers compensation is a relatively new concept in the workers compensation market. Traditionally, policies were purchased by making a standard deposit, followed by several installments. At the end of the policy period, the insurance company performed an audit to determine the difference between estimated and actual payroll. The carrier then issued an invoice for additional premium due, or they issued a refund check if the business overestimated their payroll.

With Pay As You Go coverage, select insurance companies and agencies are able to charge and collect workers comp premiums based on actual payrolls processed each pay period or each month.

Pay As You Go Workers Compensation Benefits:
  • Zero down or small deposit programs.
  • Better cash flow for small business owners.
  • Reduced risk of having a large audit balance.
  • Lower workers comp rates on select class codes.
  • Insurance costs flow with actual wages for labor.