Workers’ compensation policies are generally annual contracts that are set up between your business and the insurance company you choose for your policy. The policy will start at the effective date and will go through to the expiration date, which is generally one year from the time the policy goes into effect. Of course, there may be differences based on the insurance company and policy you choose.
The policy premium will be determined by a range of factors. This will include things like the type of business you are operating and the work your employees do, the number of employees you have, and the projected gross payroll that will be paid to those employees during the policy’s term. Getting the policy set up tends to be relatively easy, but there are other things you will have to consider and understand, as well.
Required Loss Control Inspections
When you set up a workers’ compensation policy, the insurance company wants to make sure you take your employees’ safety seriously. After all, they don’t want to have to pay out claims if there are ways to prevent injuries from occurring. To help with this, they will often require that you have a loss control inspection. This is usually done after the policy has started.
Typically, a third-party company will contact your business by phone or email to set up a visit. In some cases, it might be an employee of the insurance company, but most often it will be someone who isn’t directly employed by them.
It is important that you answer these emails or phone calls and set up a time for the inspection. Too often, business owners don’t realize that these are legitimate calls and they put off the inspection, which could cause the insurance company to cancel the policy.
When you set up the inspection, a professional will visit your site or call to learn more about how your business operates. They will also be looking at the safety of the job site and what you are doing to help keep your employees as safe as possible. They are essentially performing a risk management analysis. They will look at various areas of the company where injuries could occur, and they may want to learn more about any prior injuries that have occurred.
The inspector and insurance company will often have certain recommendations to help make the business safer for your employees. Keep in mind that these are not suggestions. You will want to adhere to the changes they want to make, or you could be at risk of losing your workers’ compensation coverage.
Certificates of Insurance
Certificates of Insurance can be obtained by requesting them from your agent. These are certificates that prove you have workers’ compensation coverage, and you may need them in a range of situations.
Those you do business with, such as lenders, banks, clients, and vendors will often want to check these certificates to ensure that you have a workers’ comp policy. Another name for this is Acord 25. If someone asks if you have an Acord form, they are talking about your Certificate of Insurance.
These certificates will include pertinent information regarding your policy. It will include the policy number, the dates it is effective and when it expires, and if there are any limitations, etc. on the policy. This will give them a better idea of whether they can do business with you. These tend to be important for contractors and those in the construction industry, as they want to make sure you have coverage for any workers that might be injured while working on their properties.
Renewal of Your Policy
Something else to be aware of during the lifecycle of your workers’ compensation policy will be the expiration date, so don’t get caught unaware and can get ready to renew it. Generally, you’ll want to start thinking about renewal for your policy 60 days before it is set to expire. At this point, you can connect with your insurance agent and let them know about any changes that might have occurred with your business.
Naturally, this would include changes to the payroll, as this is what your premium is based on. Additionally, you need to let them know about any changes to your address, operational changes, whether the business has been sold, etc.
You want to provide this information early, and you want it to be accurate, so you can get a proper quote. This is particularly important if you have set up automatic renewal. Let them know about changes in advance.
The Payroll Audit
At the expiration date of the policy, you will need to have a . Remember, when you set up your policy, the premium was based on a projection of what the payroll was likely to be during the year. Of course, the payroll may have changed at some point, and the purpose of the audit is to determine whether you spent too much or too little on your policy. The audit provides the exact payroll amount.
Once the audit has been completed, the policy will be adjusted to match what was found. This can have some major implications for what happens going forward. If it is discovered that you paid too much over the course of the year, you will receive a refund of the extra amount paid. In some cases, you could use that refund and roll it into the renewal policy, so you don’t have to pay as much.
However, if it’s discovered that you did not pay enough for the premium based on the actual payroll, you will receive a bill that will need to be paid to cover the difference. You can opt to increase your payment amounts for the renewal, so you don’t have to have a surprise bill at the end of the following year.
Another option would be to choose pay-as-you-go for a policy, which will take the actual payroll each month to calculate how much you have to pay. Talk with your insurance agent to determine the right option for you.
Are you looking for a workers’ compensation policy for your business? Calculate your estimated premium here in less than 10 minutes and let us know if you are interested in pursuing a policy with Kickstand Insurance.
Note: The information provided in this blog is intended for general informational purposes only and is not a substitute for professional legal or insurance advice. Laws and regulations regarding workers' compensation insurance are complex and vary by state and by specific circumstances. Therefore, readers are encouraged to consult with a qualified legal or insurance professional to obtain advice with respect to any particular issue or problem they might have.
Mordechai Kamenetsky, co-founder and lead agent of Kickstand, is recognized as an expert in workers' compensation. He is passionate about helping small businesses manage risks and lower their workers' comp costs. In his articles, he educates readers and clients on the intricacies of workers' comp insurance.
