What to Know About Workers' Comp: The 4 Most Important Aspects for Business Owners
Dealing with workers' compensation insurance might feel overwhelming, like you're trying to crack a complicated code. But what if we told you that mastering just four main things could make everything much easier? Yes, really—just four!
Once you get these down pat, everything else falls into place much more smoothly.
In this guide, we'll simplify these four areas so you can handle your workers' comp with confidence and less stress. Here’s how to make sure you've got everything covered properly:
#1: It’s all about Payroll
When you’re thinking about workers’ compensation insurance, one of the biggest things that impacts the cost of your premium is your payroll. This isn’t about how many people work for you. It’s about how much you pay them as a total.
Insurance companies want to have info about your payroll for the next year for one simple reason - the amount you pay workers ties into the risk and cost of any potential claims. A higher payroll usually poses more risks, especially in physically demanding jobs.
A payroll estimate is not something you can just guess. It’s crucial to get it right.
If you underestimate the amount you pay, you’ll be paying a big bill after the policy is audited. If your estimate is too high, you’re throwing extra money into premiums that you don’t need to. As such, accuracy is critical.
The average coverage your company will need varies based on the industry you are in and what sort of jobs your employees are tasked with doing. Are they mostly desk jobs or in high-risk positions?
This influences how much coverage you need and what you’ll pay for it. Remember that every role has its own risk level and that impacts insurance costs. Getting it all right helps you avoid paying too much or too little.
#2: Prepare for an audit
Getting audited is something most people try to avoid in all aspects of life. However, with workers’ compensation insurance, getting audited isn’t a possibility; it’s going to happen. Audits are part of the process.
Most of the time, they will occur at the end of the policy period or if you decide to cancel the policy early.
The main purpose of an audit is to compare your payroll estimate with the actual amount you end up paying. This is important since it gives the insurance company the chance to make sure the premiums you paid are based on your actual payroll expenses.
So how does this all work?
Let’s say your business did really well this year and your payroll expenses were higher than you anticipated. You’d most likely end up with a bill for the extra premium you should have paid.
However, let’s say the year was not as good as expected and payroll is down. In this case, you could get a refund. The check-and-balance system ensures everything remains fair.
Grab this checklist to prepare for the Workers' Comp Audit
#3: Don’t play games with paying your premiums
One of the most important things you can do regarding workers’ compensation insurance is to give it the seriousness it needs. This isn’t something you want to get done just to check it off a to-do list. It’s an essential part of making sure your business and your workers are protected.
Making sure premiums are paid on time is essential. Once you start slipping up, this could lead not only to late fees but to larger consequences. The insurance company may even decide not to renew your policy.
Imagine yourself in a situation where a terrible accident happens, and you find out that you do not have workers’ compensation insurance. No business owner wants to be in that scenario.
Not having insurance would leave your business open to serious consequences in the legal and financial realms.
Make sure your workers’ comp payments are prioritized to avoid losing coverage while making sure your business is protected from setbacks.
#4: Loss control visits aren’t negotiable
After you have a workers’ compensation policy ready, expect a loss control visit from the insurance company.
This is very common, especially in industries with high risk, such as construction. In some cases, as many as 90% of businesses will go through this sort of evaluation.
These visits are not just formalities. Someone will be looking to see if the workplace meets safety standards and is free of hazards that would lead to insurance claims.
The inspector will be there to identify any safety issues and provide ideas for improvements. While these are recommendations, they are not optional.
Whether you need to ensure safety cones are in place to avoid accidents, roll out personal protective equipment to all staff, or implement other safety protocols, you are required to comply.
If you do not, the consequences can be severe and even result in your policy being canceled.
Most of the time, this inspection will occur two or three weeks after your policy goes into effect. This timing shows how important it is to be serious about safety from the start.
The visits should be taken seriously but you can think of them as a way to enhance your safety rather than something you just have to get through.
Ready to protect your business and employees?
Request an instant workers’ comp quote or call us at 886-338-8823 for a consultation today.
Remember that workers’ comp insurance is designed to support your team and keep your company thriving. Treat it right and it will do exactly that!
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.
Workers' compensation is an essential part of any business. What makes it challenging is that the payment structure requires an up-front payment based on projections, with any remaining balance due at the audit.
