There are risks associated with all lines of work. However, certain industries, by nature, put employees in more dangerous situations than others. If you own or operate a business within an accident-prone injury, reducing workplace liabilities and having quality insurance coverage is a top priority. Whether you’re starting a new business or looking for a better insurance provider, you’ll want to invest time and energy in researching and comparing your policy options.
Provisions of Workers’ Compensation Insurance
Before shopping around for a workers’ comp policy, refresh yourself on what workers’ comp insurance achieves and provides:
- Financial Protection – Workers’ comp policies protect employers from having to pay of pocket for the expenses associated with workplace injuries, illnesses, and fatalities. Without insurance plans, business owners would be financially liable for onsite injuries, which could easily bankrupt and company or individual.
- Legal Support – Some, but not all, workers’ comp policies include financial support to employers for legal fees and settlements should an employee take them to court.
- Employee Care and Wage Compensation – Workers’ comp covers medical expenses for employees who sustain injuries or work-related illnesses while onsite or while offsite performing their work-mandated duties. The insurance also covers a portion of wages lost during the recovery period. In the case of a fatality, workers’ comp can pay for funeral expenses.
Understanding Your Industry
Different lines of work naturally come with varying levels of occupational hazards, and these risks directly impact the price employers pay for workers’ comp insurance. Every industry has a designated risk classification code that insurance providers use to calculate premiums for their clients.
A few high-risk industries include:
- The Health Sector – The level of risk associated with the healthcare industry has skyrocketed in the face of the new coronavirus. People who have to be in health centers face a very real risk of being infected every time they go to work. But even before the COVID-19 outbreak, employees in this industry accepted the risks of infection, injury, and fatigue.
- Construction – According to the Occupational Safety and Health Administration (OSHA), 20 percent of occupational deaths in 2018 occurred within the construction industry. The same 2018 study by OSHA explained: “The leading causes of private sector worker deaths (excluding highway collisions) in the construction industry were falls, followed by struck by object, electrocution, and caught-in/between.”
- Mining – People who work in mines are continually exposed to dust and other airborne minerals that can wreak havoc on the respiratory system over time.
What Else Impacts Premiums?
In general, insurance providers use the following formula to calculate workers’ comp premiums:
Class Code Rate X Experience Modifier. X (Payroll/$100) = Premium
While other nuances are factored in, this formula represents the most significant elements that insurance providers consider. The class code rate refers to the risk classification categories explained above, and the company’s previous claims history determines the experience modifier. Lastly, payroll refers to the total amount paid out to employees by a company.
Exploring Your Options
Different states have different policies concerning workers’ compensation coverage. However, all states, except for Texas, require companies to have some form of workers’ comp insurance.
All other states have one of the following types of workers compensation state funds:
- Monopolistic – If your state has a monopolistic state fund, you must purchase insurance through the fund; employers cannot shop for policies through private insurers. The states with monopolistic state funds are Ohio, Wyoming, Washington, and North Dakota.
- Competitive – On the other hand, states with competitive funds allow employers to choose between using the stand fund and purchasing insurance from a private provider.
Tips for High-Risk Business Owners
If you are an employer in a high-risk sector and you operate within a state with a competitive fund, consider the following tips while weighing your options:
- Consider the state fund. Even though you have the option of purchasing workers’ comp through a private insurer, the state fund may offer a better deal for particularly high-risk businesses.
- Research extensively to ensure you’re getting the best deal. Look for companies that specialize in covering high-risk industries, as they are likely to offer more reasonable premiums.
- Work to reduce your risk. You stand to pay lower premiums if you create a work environment that the insurer feels is well-managed. Provide your staff with protective equipment along with plenty of information regarding the hazards and potential hazards. You will also do well to train your workforce thoroughly before letting them handle any equipment.
The Correct Coverage for Your Business
Even within the same industry, every business is different and, in turn, faces different risk factors. When shopping for workers’ comp, remember that insurance policies aren’t one-size-fits-all. Consider the unique needs of your company and employees and base your insurance choice on such factors.