Understanding Workers Compensation Insurance
To get the best workers comp insurance quote, you first need to understand what it is and why you need it. Workers comp insurance provides coverage for work-related injuries that your employees may suffer. It’s required by law in most states for any business with employees.
As an employer, workers comp insurance protects you from lawsuits by providing coverage for medical bills and lost wages if an employee is hurt on the job. It also protects your employees by ensuring they receive compensation for work injuries. The costs are usually paid by employers, though some states allow employees to contribute.
How Rates Are Determined
Workers comp rates depend on several factors:
- Your industry classification code based on the type of business you operate. Higher-risk jobs like construction mean higher premiums.
- Your company’s claims and accident history. More claims mean higher rates.
- State requirements. Rates are regulated by each state and vary significantly between states.
- Number of employees and their job classifications. Rates are calculated per $100 of payroll for each class of employee.
To get the best quote, you need to understand how these factors determine your premiums. You should also consider raising deductibles, improving workplace safety, and shopping around at different insurance companies.
READ ALSO: Small Business Owners: Do You Really Need Workers’ Comp Insurance?
Factors That Impact Your Workers Comp Quote
When shopping for workers comp insurance, several factors determine how much your premium will cost.
1. Your Business Classification
The type of business you operate significantly impacts your rate. Higher-risk jobs like construction or manufacturing usually pay more than office work. Underwriters analyze your job classifications, duties, and work environments. The more hazardous the job or workplace, the higher the premium.
2. Your Claims History
Insurers look at your past workers comp claims to predict future costs. If you have a history of frequent or severe claims, expect to pay more. Implementing strong safety programs and protocols can help reduce accidents and lower your rates over time.
3. Location and Size
Rates vary in different areas and states based on local costs of living and healthcare. Larger companies with many employees generally get lower per-person rates. Smaller businesses may still find affordable plans, especially if you have a good safety record and lower-risk jobs.
4. Optional Coverages
You can add optional coverages like employer liability insurance or coverage for sole proprietors and partners. However, selecting more options will increase your total premium. Only choose what you truly need.
Getting multiple quotes from various insurers helps ensure you find the most competitive rate for your unique situation.
Getting Accurate Information for Your Quote
To get the most accurate quote for your workers comp insurance, you’ll need to provide the insurance broker or agent with some key details about your business.
1. Business Information
Give the broker your company’s official name, address, ownership details (LLC, corporation, partnership, etc.), and federal tax ID number. They’ll also want to know about the nature of your business, industry classification code (also called an SIC or NAICS code), and a general description of your operations.
2. Employee Details
The number of employees you have and their job duties directly impact your workers comp rates. Provide the broker with the number of full- and part-time staff, contractors, and independent contractors you employ. Also include each employee’s official job title, job description, and average annual pay.
3. Workplace Details
Give the broker information about your work environment and safety measures. Let them know if you have multiple locations, operate heavy machinery, work at heights, handle hazardous chemicals, etc. Also provide details on your safety programs, training, and any workplace modifications you’ve made to improve employee safety. The more proactive you are about workplace safety, the lower your rates may be.
4. Claims History
Your claims history, especially any large claims, will significantly impact your workers comp quote. Be prepared to provide information on any workplace injuries, illnesses, or deaths over the past five years. Include details like the nature of the claim, costs, and any corrective actions taken. Although it may be unpleasant to revisit, giving an accurate claims history will help the broker determine the right coverage and rates for your business.
Comparing Quotes From Multiple Providers
Don’t just go with the first quote you receive shop around at different companies to compare.
Get Quotes From Multiple Providers
Contact at least 3-5 different insurance companies that offer workers comp coverage in your state and request quotes from them. Provide the same information for each quote so you can make an apples-to-apples comparison. Things like your business type, number of employees, payroll, job classifications, etc. The more quotes you compare, the better chance of finding a competitive rate.
Some of the top workers comp insurance providers to get quotes from include:
- Liberty Mutual
- Travelers
- Hartford
- Chubb
- AmTrust
Compare Quotes Carefully
Once you receive the quotes, review them thoroughly. Compare the total estimated annual premium, coverage limits, exclusions or limitations, and deductibles for each option. See if bundling with other policies like general liability insurance would provide a discount. Check the financial stability and customer satisfaction ratings of each insurance company as well.
READ ALSO: How to Buy Business Insurance Online (The Easy Way)
Tips for Negotiating the Best Workers Comp Rate
When getting quotes for workers comp insurance, keep these tips in mind to get the best rate possible for your business.
1. Compare Quotes From Multiple Carriers
Don’t just go with the first quote you receive. Compare rates from at least 3-5 different insurance companies to find the most affordable option. Some carriers specialize in certain industries or business sizes, so the rates can vary significantly between companies.
2. Ask About Discounts
Inquire about any discounts the insurance company offers that you may qualify for. Common discounts include bundling workers comp with other business policies, safety program participation, drug-free workplace, job safety bonuses, and advance payment or prepayment discounts for paying your premium upfront annually instead of monthly or quarterly. Any discount can help lower your overall rate.
3. Review Your Loss Experience Modifier
Your loss experience modifier or “mod factor” compares your business’s claims history to the average for your industry. A mod of 1.0 is average. Below 1.0 means you have had fewer claims than average and can qualify for lower rates. Above 1.0 means higher rates. Ask how you can improve your mod to lower your premium. Options include ramping up workplace safety efforts, closing older claims, and working with your carrier to reclassify job types.
4. Consider Higher Deductibles
Just like with health insurance, choosing a higher deductible for workers comp means lower premiums. If you have a good claims history, a higher deductible could save you a sizable amount each year and the risk may be low that you have many claims reach the deductible amount. Discuss deductible options with the insurance companies providing your quotes.
5. Ask About Payment Plans
Don’t assume you have to pay your entire premium upfront. Ask about installment plans where you pay a percentage upfront and the remainder over the policy period through monthly or quarterly payments. While you may pay a small service fee for installments, it can make your workers comp insurance more affordable and budget-friendly.
Conclusion
With the right knowledge and actions, you can find an affordable workers compensation insurance policy to properly protect your business and employees. Comparing multiple quotes from reputable providers is the best way to find a balance of coverage, service, and competitive pricing.
