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Workers Compensation is Required By Law in
Workers Comp insurance covers employees injured while working on the job. Workers
comp provides a form of wage replacement and medical expense coverage for work
related injuries or illnesses. A policy will cover the cost of necessary medical
care and pay a percentage of the employees average wages if they can't work after an
injury or illness. All polices also pay disability and death benefits in the event
of partial or permanent disability or death. Medical insurance does not cover
See also: What is
Workers Compensation Workers
Rates are based on a percentage of gross wages (or a rate per $100 of payroll). They
can vary from as little as a few cents per $100 all the way past 99% per $100 of
payroll. There are three key factors that determine rates: 1) What business you're
in, 2) Your claims history and how it compares to other employers in your industry,
and 3) Your total amount of employee wages. A clerical (white-collar) rate will
always be less expensive than a construction (blue-collar) rate because the exposure
and claims history/severity is more costly to insure.
Workers Comp Class Codes Workers Comp Experience Rating
When an employee gets hurt on the job or has a work-related illness only workers'
comp insurance will cover them. Health insurance will not cover an accident, let
alone pay lost wages. Additionally, workers compensation policies cover additional
employer liability and protect employers from lawsuits by injured employees. Without
workers comp, employers may be held personally liable for the cost medical care and
lost wages, and may even be fined or jailed.
See also: Employers Liability
Workers Comp provides coverage for all full-time and part-time employees and may
cover owners and officers depending on the application and the owners inclusion or
exclusion on the policy. In many states, a policy will cover uninsured
subcontractors and 1099 employees if they do not have other coverage in place. As a
general rule, employers with at least one employee should have coverage.
See also: Workers Compensation Exclusion
The best practice is to always report any claim right away to the insurance company.
This will help ensure that employees get the care they need and it protects you in
the event the claim gets worse. Statics show that earlier claim reporting reduces
the overall cost of most claims. Your agent should be willing to help you and all
policies and required Comp Postings will have the carriers contact number for
See also: Workers
Insurance carriers may conduct an annual audit for any policy after it expires. The
purpose behind an audit is to make sure you paid the right amount of premium so that
you don't pay too much or too little. Since traditional plans were based on
estimated payroll, most audits were done to determine actual payroll over the policy
period. Auditors will also ask about subcontractors and verify correct
classification codes. Audit can be done over the phone, via mail, or in person
depending on the carriers' preference.
See also: Workers
Compensation Audits NCCI
Although workers compensation may not be a choice, how and who you get it from is
your decision Ask a lot of questions and make sure you fully understand all of your
options. Compare coverages from carriers and review rates from at least 3 carriers
to make sure your getting the best rates. Ask the agent about the carriers
reputation and how they manage claims. Rates can vary significantly from one carrier
to the next. And many agents only have a few insurance contracts do to their size or
location. Be sure you agent has plenty of markets and expertise with workers comp
See also: 10 Good Workers Comp
Pay As You Go plans are the newest way to buy coverage. Instead of making standard
installments based on estimated payroll, these programs allow business owner to pay
their premium based of real-time payroll. There are three primary benefits
including: 1. Lower start-up cost for policies, 2. Better cash flow throughout the
policy period, and 3. Less exposure to year end audit balances.
See also: Pay As You Go Workers
In most states, owners and officers have the ability to choose whether or not they
want to be excluded or included in coverage. There are some restrictions for
corporate officers in several states. It is important to clearly communicate your
intention with your agent prior to binding coverage. Most carriers will go by the
choices listed on the Acord 130 Application for Coverage. It is also important to
note that some states require an additional form filed to either exclude owners or
to include owners in coverage. Failure to properly execute these forms can create a
real problem in the event of an audit or a claim.
See also: Workers Compensation Exclusion
A ghost policy is a policy most common with subcontractors who are required to carry
workers compensation coverage but don't have any employees. The owner is typically
excluded from coverage and the policy only applies if the owner hires an employee or
utilizes other subcontractors who do not have coverage during the policy period.
They are typically based off of a minimum premium amount per state.
See also: Ghost Policy
An Experience Modification Factor is a factor, or rate, assigned to an employer by
NCCI or a state rating bureau. This factor is tracked by each employers' FEIN and
typically takes a few years before being assigned. An employer who do not have an
official Experience Modification Factor, or "MOD" are automatically assigned a value
of 1.00. This means the employer will not receive any mandatory credit or debit on
their rates. A credit Mod is represented by any number below 1.00 (example: .85 = a
15% automatic credit). A debit MOD is any number greater than 1.00 (example: 1.25 -
a 25% automatic debit on rates).
See also: Experience Modification Rate
It is generally the agents responsibility to properly classify your employees into
the proper workers comp class codes. Unfortunately, many agents inadvertently
misclassify employees. Employers have the right to appeal to NCCI or their state
rating bureau to get assistance with proper employee classification codes. Carriers
also have the right to reclassify employees during the annual audit so its important
to utilize the proper codes up front.
See also: NCCI
Workers Compensation is not a federally mandated program. Therefore, each state is
free to establish their own laws and rules regarding coverage. All states share the
common framework and state rules and regulations are designed to eliminate
litigation and ensure injured employees are financially repaired in the event of a
claim. States have different guidelines and laws regarding requirements for
coverage, treatment of owners, and even rates.
See also: Workers
A workers compensation policy always has seven basic parts to the coverage: 1.
Medical treatment, 2 Disease exposure, 3. Employers Liability, 4. Temporary
disability, 5. Permanent disability, 6. Total disability, and 7. Death benefits. All
policies address coverage for these separate categories.
See also: Workers
Almost all states require employers to obtain workers compensation coverage.
However, most states utilize private insurance carriers in a competitive market. In
some cases, none of the private insurance companies want to write high hazard
industries or companies who have had a high number of claims over a period of time.
A State Fund or Assigned Risk Pool is the carrier of last resort and is obligated to
provide coverage for these companies at a higher cost to the insured.
See also: State
In most cases an A rated carrier has shown greater financial strength and has a
higher amount of reserves set aside to pay claims and, therefore, greater financial
solvency, However, recent years have demonstrated that more A rated carriers have
gone bankrupt than non-rated or B rated carriers. As an agency, we evaluate our
carriers' rating as well as their reinsurance coverage and reserve funds before
representing them. In some cases, a general contractor may require all
subcontractors to have coverage from an A rated carrier.
A certificate of insurance is an Acord form used by insurance agencies or carriers
to provide proof of insurance coverage two a third party on behalf of an insured.
Certificates are most commonly used in the construction industry. They will list the
insurance company, the limits of coverage, and the policy inception/expiration date.
It is not common for Certificates to contain additional special wording regarding
Loss Runs is a common insurance term you may hear from insurance agents. The
term refers to an employers Official Claims Report from their current or prior
insurance company. Carriers are legally required to provide Loss Runs within a
reasonable amount of time. Most insurance companies typically want to view an
employer's prior claims history for 3 years before offering a quote. This practice
is utilized to verify the amount and cost of claims over a period of time. Other
terms to describe loss runs are Loss History and Claims History. Loss Runs can be
requested from your insurance agent or directly from the insurance carrier.
All costs for workers' compensation insurance should be paid by the employer.
Employers can't deduct any part of premiums from any employees' wages for workers
All states require employers to purchase workers compensation insurance or
self-insure their coverage with company assets. Each state has different rules and
regulations regarding the number of employees needed before the employer must have
coverage in place.
See also: State Workers'
It can pay off big time to shop coverage if you don't live in one of the four
monopolistic states or the few states that set the rates for each class code. In
most states, private insurance companies are permitted to file their rate and often
file several sets of rates with the insurance departments. This allows them to offer
different rates from one employer to the next. Additionally, your loss history and
industry type may appeal to certain carriers but not others. An agencies overall
book size and their relationship with the insurance company underwriters often make
a tremendous difference since most states allow policy credits and debits up to 25%.
This question can vary significantly by state and often depends on whether or not
the two states involved have reciprocity insurance agreements, and how long an
employee will be working in the state she doesn't live in. Generally, an injured
employee will be able to claim benefits in either state under these circumstances.
You insurance company should be notified of all states involved with you coverage
and each state should be listed on the policy under Section 3C.
If you live in one of the four remaining monopolistic states, you will need to
purchase coverage directly from that state fund. Employers in other states generally
buy workers compensation from a licensed insurance agent or agency. More employer
have began shopping their workers comp insurance online with national agencies like
Workers Compensation Shop. com because they can access more insurance carriers with
less time and effort.
The short answer is yes. Employers are legally required to purchase workers
compensation insurance. When they buy a policy they have entered into an agreement
with the insurance company that includes a promise to pay for injuries. If premium
was paid for the injured immigrant, then the carrier will pay the claim.
Every state has different requirements for workers compensation insurance and how
many employees you can have before you must get covered. Additionally, other
contracts and agreements with other businesses or parties may also affect your
The correct spelling is workers' compensation. There are many terms and
alternative spellings used to describe this insurance coverage including: workers
comp, work comp, workmans compensation, and workmens comp.
Generally speaking an agent will make anywhere from 5% of the insurance premium up
to 12% depending on how they wrote the policy and their compensation plan with each
of their insurance carries. Policies procured through a wholesale broker usually pay
on the lower end of the spectrum and policies bound through a direct appointment
with an insurance company pay towards the higher end of the commission spectrum.
See also: Workers
At Workers Compensation Shop.com we work directly with business owners to find the
lowest rates and best quotes available for their coverage. We also have a separate
wholesale division dedicated to helping other insurance agents find the best
coverage for their customers.
See also: Retail vs. Wholesale
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