Work Comp 101

When you think of insurance policies that businesses need, what are the first few that come to mind? For me at least, one of the first is Workers’ Compensation insurance…I’m willing to bet that was pretty high on the list for you too. Let’s talk about it!

What is Work Comp?

Workers’ compensation (work comp) is part of property and casualty insurance protecting one of the most important aspects of any business—the employees. For employees, work comp is basically an added medical benefit usable in the event of an on the job accident that does not require any co-pay or deductible to be paid.

It isn’t only for the employee though: for the employer, it provides financial coverage for time lost, potential litigations, and if the employee’s injury is serious or fatal.  

What does it cost?

The premium that an employer has to pay for work comp depends on four main things:

Class code: this is determined by the National Council on Compensation Insurance (NCCI). The code basically classifies what your business is and does. An independent insurance agent at Town & Country Insurance can help you find your class code!

Payroll: the amount of money spent on payroll, which obviously depends a lot on the number of employees, plays a role in pricing the policy.

Loss History: this is a crucial component to determining the final premium cost. Businesses with a low experience modification factor (e-mod) may get lower premiums, while ones with higher e-mods could encounter higher costs. This is something that can be improved over time through keeping the workplace safe and healthy and managing claims costs. Don’t be discouraged if your business isn’t on the low end yet; it can be!

Audits: businesses change, and audits are an essential part of making sure your insurance policy changes with your business. This can be intimidating, but it is good to be prepared for this annual review of coverage; rapidly growing businesses will need to be prepared to save money throughout the year in case their premium increases. Audits can also catch errors in the policy that could be costing unnecessary money—it’s always nice to get a nice chunk of change put back in your pocket.

Uncertainty is the name of the game in business, (and in life—does anyone really know what will happen on any given day?). With workers’ compensation, however, protection is certain. Don’t let yourself or your employees face the wrath of the dreaded Medical Charges!

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