Just imagine one of your employees getting injured at work and their medical bills and absence from work accumulating. Are you insured to cover the cost of this work-related injury? Can you pay for attorney fees after your employee sues you for their injury? Can you afford the medical bills that will appear following their hospital and physical therapy visits?
Most employers cannot afford to cover these expenses out of pocket and that is why Workers Compensation Insurance is available to every business owner.
Workers Compensation Insurance protects you in the instance of any work-related injuries and illnesses; covering lawsuits, medical bills for employees who are injured on the job and/or who become ill due to performing their duties, and the costs of compensation for a portion of the income they lose while they are unable to return to work.
It is important to recognize that even if the employee is at fault, it is still the responsibility of the employer to provide benefits. For example, if an employee falls off a chair after using it as a ladder and they are breaking the safety protocol, the employer is still liable for providing the employee with Workers Compensation coverage.
How is my Workers Compensation Insurance cost calculated?
When determining your premium costs, there are several aspects to consider:
- What type of work is performed at the job? All jobs have a “class code” which is a job classification code for the scope of the work they perform; in relation to a class code there is a rate per $100.00 of payroll.
- What is your gross annual payroll as a business owner? It is crucial to have an exact number for how much money is spent in payroll a year and to clearly communicate to your insurance agent what that number is.
- Your business’s payroll works hand in hand with your Workers Compensation cost. When your payroll increases, your Workers Compensation increases; when your payroll decreases, your Workers Compensation decreases.
- When getting a quote, you are getting an estimate on your annual costs. This is why it is important to forecast your annual payroll as accurately as possible.
- Have you had a lot of past work-related injuries and illnesses? The number and severity of past work-related injuries can have a strong impact on your premium costs.
X-Mod and How it can Save you Money on Premium Costs
Experience Modification (X-Mod) is a merit rating system that provides incentive to maintain safe working conditions. X-Mod modifies an employer’s premium costs according to their loss history. X-Mod is set by the Workers Compensation Insurance Rating Bureau of New Jersey.
Several elements can contribute to X-Mod:
- Claims History- Based on your claims experience for a three-year period.
- Classification Codes
Comparison to other organizations that have similar operations and size
When losses are better than average, your X-Mod helps to lower your premium costs.
How to Shop for Workers Compensation Insurance
Shopping for insurance can be very stressful so having the right information is very important. Benefits are set by the law so all the policies are generally the same between carriers. To differentiate policies, look for what kind of service the agent provides and the amount of the time they guarantee the price for. Ask yourself, "Do they help with audits? Do they review claims? Do they look to see if your payrolls are properly classified? Do they review payrolls during the policy period?" Also, you need to verify that the insurance quote is guaranteed for at least a year.
When “shopping” for Workers Compensation insurance, it is crucial to go through an independent insurance agency so they can compare prices. Make sure you find a reliable agent that will aggressively assist in investigating potentially fraudulent claims and understands your business.
Don’t Suffer the Consequences of Not Being Insured
In forty-nine states (including New Jersey, Pennsylvania and New York), it is illegal to go without Workers Compensation Insurance as a business owner. Failure to supply your employees with Workers Compensation Coverage is very significant, even when you do not have a work-related injury.
Remember Workers Compensation Insurance fraud is a crime and subject to punishment. It is imperative that you report the job descriptions of your employees properly.
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