It’s called a lot of different things – workers’ compensation insurance, workers’ comp, work comp, etc. Basically, it’s a program that’s set up to make sure that injured workers are taken care of if they get hurt or contract an illness while they’re working.
The Benefits for Employers
Workers’ compensation insurance protects employers by limiting the amount of liability they have. It puts caps on what can be paid for a work-related injury. In most cases, employers transfer all of that risk to an insurance company. Consequently, they limit their liability and have some predictability built into this relationship.
Workers’ Compensation State by State
Each state has its own workers’ compensation system. That means there are different rules and regulations across the country. Even with all of the differences, there is an abundance of commonality.
However, all of the information can be confusing. Arizona looks at things differently than Utah, and Maine is not similar to Florida. Compliance can be difficult or problematic for employers.
Who needs workers’ compensation insurance?
No matter the state you live in, every employer that has nonowner employees, must carry workers’ compensation coverage.
Insurance Coverage Options
There are a couple of different options for coverage that employers choose from:
- Most companies can go to a private insurance carrier for coverage
- Many states use a state fund or provide a place where employers can go to buy coverage.
- A few states require that you buy coverage directly from the state, fewer than ever before, but there is still a handful that does it that way.
- You can find information about your particular state’s rules and regulations here
How much does workers’ compensation insurance cost?
Workers compensation insurance premiums are determined by what type of work the employee is doing. Hundreds of class codes have been set up that describe the type of work the employee is doing. There is a cost or rate that is associated with each class code. For example, a clerical employee is classified differently than a roofer or someone who is framing an apartment building. The cost for coverage is going to be less for the clerical employee.
A simple way to save money
A simple way employers can save money on their workers’ compensation insurance is by managing their experience rating modification factor (eMOD). Based on the employer’s claim history, each company develops its own experience modification factor. It is a factor that is applied to their premium.
The math is pretty simple, if an employer keeps their claims low, they will have a low eMOD. If they have more injuries and don’t handle claims well, they will have a higher eMod. An emod factor of 1.00 is average. A higher eMod of say 1.20 means that a company would pay the average (rate x payroll) plus 20% more. If a company has an eMod of .90, they would receive a 10% discount from the “average” rates.
Employers can control the cost of their workers’ compensation program by reducing injuries, and managing claims more effectively.
Ultimately, those employers pay less premium than someone who’s not paying attention as well.
Workers’ Compensation is beneficial for everyone
The workers’ compensation system is beneficial to employers because it creates a partnership between insurance carriers, employers, and other service providers like Diversified. As a brokerage firm, Diversified partners together with employers to make workplaces safer. We want employees to go to work and come home in the same condition as they left.
As a result, we want to help them create great workplaces where people can go and feel safe. This includes: use of the correct PPE (personal protective equipment), working with machinery that is guarded correctly, and providing sufficient training so everyone knows how to do their job safely. In the end, the goal is to protect employees, and when we help employers do that, everybody wins.
You can go here to learn more about how we can help you create a robust workers’ compensation insurance program.