To most employers, Workers Compensation Insurance is a mystery and a dreaded expense much like paying taxes. However, using the lessons below you will be armed with a basic understanding of workers comp insurance and you will be able to manage your coverage, and costs.
When Am I Required To Have Workers Compensation Coverage?
Every state will have their own requirements, however, most adopt the rule of three total employees. Once you have three employees, (this includes part-time and owners) you are required by state law to have Workers Compensation Insurance.
Do 1099 or “Independent Contractors” count as employees?
Again this can vary by state, but the consensus is they do count as employees. If you’re subcontracted, 1099 labor, does not have their own insurance they will count as an “employee”. You will need to provide coverage if you reach the employee limit discussed earlier unless the subcontractor has their own policy.
Am I covered if I provide services in multiple states?
If you perform duties in multiple states you will need to have your policy endorsed to include all the states you work in. Not doing this could cause a potential claim payout. Make sure you discuss which states you operate in with your insurance agent.
What if my organization consists mostly of volunteers?
By law, you are not required to have coverage for volunteer labor. However, this does not exempt you from being liable for a volunteer’s injury. We suggest you still obtain Workers Compensation Insurance to make sure you are protected properly.
Why should I purchase Workers Compensation Insurance if I am not required by law to have it?
Even if you don’t meet the law requirement for coverage, you still should have a policy. Even if your organization has 1 employee, you still would be held liable for injury, and potential compensation for their injury. Having a policy also protects you from being sued for damages exceeding your policy limits, as this is protected by state law.
Workers Compensation is expensive, how can I reduce my cost?
Here are several ways to reduce your cost:
- Owners and officers can be excluded from coverage. This could save you thousands in costs depending on the type of work you do.
- Separate out your labor force. It is important to keep detailed records for employees performing different tasks. Your office employees carry a much lower rate than your warehouse employees. If you do not keep these separate, insurance companies will include the payroll in your highest classification on your policy.
- Develop a safety and drug testing program. If you have these programs in place, you could save up to 10%, and earn future claims free discounts in the future when your policy renews.
- Work with an insurance agent that represents multiple insurance companies. This will allow you to obtain the most competitive Workers Compensation Insurance rate. This is very important since Workers Compensation typically is the most expensive of all Commercial Insurance Policies.
Workers Compensation Insurance does not have to be a complex subject. With the right information and a great relationship with an insurance agent, you should be able to be properly covered without breaking the bank. In most cases, when I work with clients that had bad Workers Compensation Insurance experiences in the past, it’s mostly related to poor information, and lack of communication by the insurance agent. If you still have questions, or would like to discuss how we can make Workers Compensation easier for you, please feel free to contact us. We look forward to hearing from you.