Are you looking into getting workers’ compensation for your company for the very first time? Do you wonder what factors go into determining how much it is? If so, then you need to learn more about the overall cost of workers’ compensation.
As with any other form of insurance, providers use a detailed system to judge certain risks. The more risk in your company’s workforce, the higher it will likely be.
Regardless of price, workers’ compensation can help you in an emergency. See below for several factors that go into determining workers’ compensation and what they mean for your company specifically.
What Is Workers’ Compensation?
You always think “it won’t happen at my company” until a workplace accident occurs that causes an injury or illness to your staff. Then you and your entire company are left scrambling.
Workers’ compensation is a form of insurance that’s meant to provide financial relief in the event of an emergency. It can help take the financial burden and protect your company, your workers, and your clients in the process.
Essentially, workers’ compensation insurance helps eliminate you (the employer) from the situation as much as possible.
If an employee gets hurt, they will voice their interest in filing a claim. From that point on, your company is removed from the situation. The employee and their lawyer will be working with your workers’ comp provider to settle.
This can assure that you keep top-tier talent even after a scary situation. There won’t be any hard feelings built towards you or the company since they’re getting the financial backing they need.
Please note: workers’ compensation isn’t an option for your business. Any company with more than one employee is legally required to have it. Be sure to read up on your state’s requirements for workers’ comp while you search for a policy.
What Factors Go Into Setting the Price?
As previously mentioned, there’s a calculated system that workers’ comp providers have for their clients. It’s used to project the risk of a possible accident and the rates that they give out accordingly.
See below for several factors that you should be aware of as you shop around. These will be a key indicator of the price you can expect to pay.
1. Your Line of Work
The line of work and industry that your company is in plays a huge role in the premiums that you’ll pay.
Think about it this way: a construction company will pay more on their workers’ comp premiums than a company that sells accounting software. Why? Because the construction company is a lot more labor-intensive, meaning more potential for an accident.
The most common type of accident with the accounting software company would be a slip-and-fall. The construction company, on the other hand, risks several different injuries, illnesses, and (in some cases) maybe even death.
The NCCI (National Council on Compensation Insurance) has a plethora of class codes that they use to determine the work of each of your employee positions.
2. Your History
In the workers’ compensation insurance industry, there is something known as an experience modification factor. This is a term for using your company’s claim history in order to gauge the likelihood of an accident in the future.
For instance, if your company has had two slip-and-fall accidents in the past, the provider could easily project that it will happen a third time (if not more).
Think of the “experience mod” in workers’ compensation to be similar to a “good driver” discount in car insurance. If your company falls below the average experience mod, then you’re likely to receive a discount. If it’s higher, then you’ll pay more.
If you’re just starting, then expect to pay the higher end of the scale. New businesses are viewed as riskier, but there’s always an opportunity to lower your rates over the next few years.
3. Your Payroll
Too many employers try to fib about their current payroll to receive a lower premium on their workers’ compensation insurance. However, in doing so, they risk the well-being of their employees in their biggest hour of need. Not to mention that it’s illegal.
Workers’ comp providers use your previous payroll in order to project what it will be for the next year.
This way, they understand how much a specific employee will need if they were to sustain an injury. For example, if a floor worker gets hurt and can’t work for several months, your provider will have a breakdown of the pay they’ll need to be covered while they wait for their injury to heal.
4. Your State
As previously mentioned, every state has certain regulations on the workers’ compensation that companies in their residence should have.
Some of these are specific to the number of employees that you have and how many warrant you to provide workers’ comp. Others specify providing workers’ comp for subcontractors as well.
It’s vitally important that you understand the requirements in your state. If you don’t take the time to learn and apply those regulations, you could be hit with significant fees and fines that your company may never financially recover from.
Find the Cost of Workers’ Compensation for Your Company Today
Now that you have seen several factors that go into determining the cost of workers’ compensation for your company, it’s time to find the right provider.
In the spirit of preventing workplace accidents, be sure to read this article for more information and tips on how to protect you and your employees from a setback.
For more inquiries, be sure to request your free quote online and we will be happy to assist you further.