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Workers Compensation is Required By Law in Most States
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 work-related injuries.
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See also: What is Workers Compensation Workers Comp Benefits
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.
See also: 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 claims.
See also: Workers Comp Claims
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 Class Codes
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 insurance.
See also: 10 Good Workers Comp Questions
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 Comp
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.
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 Codes
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 Compensation Laws
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 Compensation Basics
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 Fund
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 coverage.
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 comp coverage.
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' Compensation Rules
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 insurance requirements.
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 Compensation Commission
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 Coverage Workers Compensation Wholesaler
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