Worker’s Compensation

Ambassador Group Insurance will help guide you through the process of setting up worker’s compensation insurance for you business, and help you to understand all the details in this must-have law required insurance.

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Worker’s Compensation with Ambassador Group Insurance

Unlike other forms of business insurance, workers compensation insurance is required by law if a business has employees.  In general this coverage is meant to help both the employee and the employer.   In the event of a work related injury or illness, the employee will be provided with medical benefits and wage replacement if necessary.  These benefits come at no expense to the employee.  In exchange for this coverage the employee waives their right to sue the employer for negligence, which of course is the benefit to the employer.   The premium for this coverage is based on the annual payroll.  If a businesses payroll increases, their premium will increase.  In most cases insurance carriers audit a businesses payroll at policy year end.  More on that in a bit.

The premium variance associated with this coverage is based on several factors.  The greatest factor is the type of work the employees engage in.  A roofing company for instance, will have most of its employees working on roofs.  Inherently those employees will stand a greater chance of injury than typical office staff.  Due to the higher exposure to injury these premiums are much higher.  It is important to clarify with your agent that the employee classification is correct.  In some cases it is possible to split the classifications rating.  If half of the roofing companies payroll is office staff, the rating might be divided accordingly.

Dave Delorenzo has specialized in workers compensation for many years. ddelorenzo@ambassadorins.com

Another factor in the premium will be the amount of time the business has operated.  If the business is in its first year, the premium will be higher.  Over time however, a business will develop what is called an experience modification, or ex-mod.  Simply put this is the track record of workers compensation claims.  The rating bureau responsible for developing these experience modifications is the National Council on Compensation Insurance, or NCCI.  An ex-mod is  usually developed over a 3 year period.  After that 3 year period it is possible to get a lower experience modification that would lower the premium rate.  However, the ratings are based on the industry as a whole, not specifically on one business.  As an example, even though the roofing company may not have had any workers compensation claims in their first 3 years, their rate might still increase.

If every other roofing company has had multiple claims, it will increase the rate paid throughout the entire industry.  Unfortunately even if a business diligently avoids claims and injuries, the rest of the industry might harm the overall rating.   With new businesses the payroll will obviously be an annual estimate.  Insurance carriers will then audit that payroll at the end of the policy term.  If the estimate was to low, additional premium will be due.  If the payroll was estimated to high, the carrier will keep the difference.  Some carriers will now offer what is referred to as ‘pay as you go.’  This allows the premium to follow either the monthly, bi-monthly and sometimes weekly payroll.  This is another reason to use a broker with access to many carriers.  It is much easier for a business to manage cash flow with a ‘pay as you go’ payment option.  This plan will also help businesses that are more seasonal in operation.