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| What to do |
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Contact your insurance broker to determine your choices for workers compensation coverage.
Because of the complexity of the workers'
compensation system, most insurance carriers will not give quotes over the phone but will
require that you complete a questionnaire
so that they can determine your rates based on your exact industry and job classifications.
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| Time deadlines |
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Workers compensation is required for businesses with 3 or more employees and for construction companies with any number of employees. Workers compensation is optional for businesses with 1 or 2 employees.
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| Approximate cost |
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Insurance rates are charged on each $100 of payroll. Although carriers
are allowed to determine their own rate, the rates are monitored by the State. Determining rates is very complex and depends on your industry
as well as the job types.
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| Up-front costs |
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Most businesses must pay a deposit premium. The deposit amount is based on the estimated annual premium and
the payment schedule. It is common to prepay the
entire first year. Often the deposit can be increased to reflect extra risks such as a new business,
hazardous activities, etc. Future premium payments may be monthly, quarterly, semi-annually
or annually.
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| Corporate officers, partners and business owners |
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Corporate officers and partners may be eligible for exclusion from workers'
compensation coverage when certain conditions are met.
Sole proprietor business owners are automatically excluded unless they specifically
request to be covered.
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| To get a quote, your carrier must know |
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- Exactly what work each person will be doing. The rates are based on
thousands of job classifications. Your workers comp carrier must determine what classifications
apply to your workers. A quote cannot be issued until a risk evaluation questionnaire
and any required addenda are completed and signed by the owner, officer or partner of the business.
Be as detailed and thorough in your application as possible.
- If you have previously purchased a workers comp policy. If so, you will need to provide
a four year policy history of premiums and claims.
- If you use independent contractors. If so, you must clearly show that they are legally
independent contractors (see Are you an Employer?).
If they classify your independent contractors as employees and you disagree, ask your carrier to request
a review by the Workers Compensation Insurance Ratings Bureau.
- If you or other family workers want to be covered.
It is your responsibility to maintain current and valid contractor license numbers for
contractors who are regulated by state agencies, as well as certificates of insurance for
any contractors you have hired. Premiums will be charged for contractors if you are liable
for workers compensation benefits under state law.
Warning: Do not simply request workers comp coverage for your independent contractors.
The IRS may consider that to be evidence that you are inconsistently treating these workers
as both employees and independent contractors, which will invalidate their independent
contractor status. Please consult with a labor attorney before taking any action.
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| Multiple classifications for one employee possible |
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After your carrier has discussed the classifications chosen for your business,
be sure to ask for a list of similar classifications and their rates.
In some industries, it is possible for one employee to work in several job classifications.
Employers can save in premiums by keeping payroll records that clearly distinguish the
type of work done.
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| Annual audit |
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Most workers comp carriers will audit your payroll annually and make
premium adjustments. The amounts that you pay during the policy year are based on an
estimated annual premium. At the expiration of the policy, an audit will be done and a
final premium will be determined, resulting in a refund or a bill for additional premium due.
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| Can you avoid getting coverage? |
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Workers compensation was developed to protect both your employees
and employers. Through this system employees generally cannot sue employers for injuries,
but must obtain benefits and any other compensation through the workers compensation
system. |
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