Workers Compensation
What's Covered, How It's Rated and Where to Buy It
Now that the you've decided you need workers compensation, it's time to find out what it covers, how its rated and how to get it.
Since workers compensation is s a mandatory coverage, business with employees must purchase a workers compensation policy. If you are starting a new business and are in the process of soliciting insurance quotes, here's some information that will be helpful in your insurance shopping process:
What does workers compensation cover?
That is a two-fold answer. Part A, Workers Compensation, covers your employees. It covers their medical expenses, lost income wages, rehabilitation costs and, if needed, death benefits for employees who sustain an injury, illness and/or contract a disease as a result of their employment. Each state's Workers Compensation Board sets the actual monetary minimums and maximums the employee will receive.
Part B, Employers Liability, covers the employer in the event the employee elects not to accept coverages as offered under Part A of the policy. By doing so, they exercise their right to sue your company instead. Part B defends and protects the employer's interests.
How much does it cost?
Workers compensation policy premiums are calculated based on the class of business, annual payrolls and loss history. Take for example, you're thinking of starting a construction company. The type of workers compensation claims and severity of claims would be much different than if you were to start a word processing business. An insurance underwriter will look at the construction business as much riskier than a word processing business..
To appropriately charge for the anticipated risk, workers compensation policies are rated based on payroll classification. Each classification (class code) has it's own corresponding rate. For instance, as of 6/1/2007, in the state of Connecticut the clerical class code (8810) bears a rate of .30 per $100 of payroll, while the more riskier die casting manufacturing class code (1925) a rate of 7.48 per $100 of payroll.
To find the most recent class codes and their corresponding rates, check with your state's Workers Compensation Board.
In addition to your payroll by class code, your loss experience will serve to modify our annual premium. If you've been in business for a few years and have sustained many losses, your premium will be subject to a debit, which in essence is a type of surcharge, which will increase your workers compensation premium. Conversely, if you've operated your business for several years without a loss or with minimal losses, your premium will be credited which means your annual premium will be reduced. It is a way of motivating companies to pay attention to controlling losses.
Where can I get a workers compensation policy?
Speak to your agent or broker. Be sure to ask the right questions. Depending on your type of business and your exposures, your agent should be able to provide you with two or more workers compensation other business insurance coverages to choose from.
