In case you missed it, here’s a recap of our discussion on workers’ compensation with Matt Zender, Vice President of Underwriting at AmTrust Financial. Watch the video below for the full webinar.
Every single business has a responsibility to protect a business’ most important asset, their employees. One of the most obvious ways to offer that protection is through workers’ compensation insurance.
The general rule of thumb across most states is - if you have employees, you need to have coverage.
But from who? And how much should you pay?
Forty-six of the 50 states in the U.S. are what is referred to as a competitive market. So, for example, California has dozens of insurance carriers that could write your policy. But in the states of Ohio, Wyoming, North Dakota and Washington, each of those states have only one carrier that is run by its state government. In those states, because there is only one carrier it is considered monopolistic.
Depending on what state you’re in, there are a couple of things to consider:
If you’re doing business in multiple states, you may or may not need workers’ compensation in those additional states. If comes down to a number of factors, including the state of residence. If they are just visiting a state, even semi-routinely, they may not need coverage in that state.
If you’re employing family or part-time workers, you will need to look into your state’s requirements. For family employees, they might not need coverage if they have an ownership stake in the business.
On average, due to competition, private carrier rates tend to be lower than those provided by a state fund. But a huge portion as it relates to all other business in your particular class code (as roughly determined by losses divided by payroll).
There are hundreds of classifications that exist, so if your business is being incorrectly classified, you could be paying too much. For instance, there are a dozen different class codes for the automotive service industry, so your rate will vary depending on whether you’re in auto service repair versus auto body versus auto dismantling.
The underwriter also looks at your historical loss history, the claims you’ve had and the amount of payroll you have - which are all applied to the rating algorithm, either moving your premium up or down.
If you’re a small business owner, every dollar counts. Here are four tips to help you lower your cost.
Workers’ compensation coverage is considered “no-fault,” meaning as long as your employee was injured while working for you, they will almost always receive coverage. There are very few exceptions. In exchange for this “no-fault” system, the employees cannot sue their employer in a tort-system. This is considered the Grand Bargain. There are a few instances where an employee can sue an employer, i.e. if the employer were to intentionally remove the safety guard on a machine that was designed to protect the employee. In that case, employers’ liability coverage will provide coverage.
© 2018 BusinessBlocks. All rights reserved.