Workers Compensation Insurance

Workers' Compensation Insurance, which is mandated for most businesses by state law, provides coverage for employees who are injured or disabled on the job. It differs from most types of insurance in that although "the business" is the named insured...it is not the direct recipient of policy benefits. Instead, the benefits are provided directly to entitled employees.

This information will help you understand what is covered by Workers' Compensation Insurance and some of the factors that may affect your premium. However, keep in mind that Workers' Compensation is regulated on a state-by-state basis, and the information presented here is simply a guide. Your InsureMeForLess.com Expert Associate can help you determine what your state requirements are.
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Workers' Compensation Insurance applies to employees' injuries or diseases resulting from employment. Almost all employees are covered, including part-time and temporary workers, with a few exceptions that may vary from state to state (e.g. sole proprietors). Employees' dependents are also covered in the event of employee death resulting from on-the-job injury or disease. Coverage begins on the employee's first day of work.

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Standard benefits for covered employees generally include:

• MEDICAL: Payment of all necessary medical treatments and related health care costs (e.g. hospitalization, prescriptions). 
• TEMPORARY DISABILITY: Payment of two-thirds of the employee's average salary, subject to a maximum amount. 
• PERMANENT DISABILITY: Payment of a portion of lost wages. The amount of payment may vary according to the severity of the disability.
• VOCATIONAL REHABILITATION: Payment for services such as job retraining and placement if the employee cannot return to his or her previous job.
•  DEATH BENEFITS: Payment to the employee's dependents for burial expenses and partial replacement of the employee's salary.

Workers' Compensation policies often include employer's liability coverage, which provides protection against lawsuits brought on by employees for work-related bodily injury, but "does not" include Employee Practices Liability otherwise referred to as discrimination or sexual harassment.

Factors That Determine The Premium 

1. Location
2. Industry Job Classifications
3. Modification Factor
4. Liability Limits

This following is an outline of some of the major considerations that may affect your workers' compensation premium, however each situation is unique and may vary. Your Expert Associate can provide additional information related to your specific situation.  

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1. Location: Because Workers' Compensation insurance is regulated state-by-state, premiums may vary depending on your business' location. Some states have minimum premiums.

    

2. Industry/Job Classifications: Workers' Compensation premiums are determined, in part, by the risk of injury or disease associated with the type of work performed by your employees. This can be a function of your industry as well as the specific duties performed by your employees. Insurance providers use hundreds of codes to classify employees, but a small business' employees typically fall under just 1 to 4 classifications. For example, employees for a retail company may include salespeople, office workers, and drivers.  Insurance providers are specifically concerned with your actual payroll per classification, rather than the number of employees.  If you have questions regarding classifications, please consult your InsureMeForLess.com Expert Associate. You may be audited after the first year of coverage to ensure proper classifications. If employees are re-classified as a result of the audit, your premium may be adjusted accordingly.

    

3. Modification Factor: Your modification factor is a rating based primarily on your claims history, relative to the average claims for businesses that are in your industry and located in your in state. Both the frequency of claims and the dollar amount of losses are taken into consideration, with greater weight on the frequency of claims.  The modification factor is used by insurance providers as a tool to help predict future losses. As a result, an above-average rating (indicated by a modification factor less than 1.00) may result in lower premiums, while a below-average rating (indicated by a modification factor greater than 1.00) may result in higher premiums.  Although the modification factor is determined by the insurance company, your InsureMeForLess.com Expert Associate, in some cases, might help you in calculating your own test mods and preliminary mods.

    

4. Liability Limits: A liability limit is the maximum coverage you can receive for employee claims. Workers' compensation policies typically contain three different liability limits: 
   1. A claim limit per employee accident, per year.
   2. A policy limit for the combined annual claims of employee diseases.
   3. A claim limit per employee disease, per year Standard liability limits include the following: $100K, $500K, and $1 million. Higher limits tend to result in higher premiums.

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