February 14, 2011
If you have at least one employee, every state in America except Texas requires that you carry worker's compensation insurance. Like many other necessary business expenses, the cost for workers compensation insurance for small business are increasing. Here are some tips to help you manage your policy. Proper policy management may help you qualify for more affordable workers comp quotes and save on workers compensation insurance.
Workers Compensation Insurance Policy Management
The premium you pay for workers compensation insurance is determined to a large extent by employment classifications. These are primarily established by the National Council on Compensation Insurance (NCCI), which develops the more than 600 classifications used by insurance underwriters in most states.
The classifications rank the relative danger of performing a job. The more hazardous the job (think roofer or exterminator), the higher the premium. The tricky part is when an employee does more than one kind of work. The rule is that the underwriters classify the employee by the classification with the higher rate. When getting worker comp quotes or reviewing your current policy, be certain every employee is properly classified.
Your premium will be calculated by multiplying the rate of classification by your payroll compensation. Underwriters generally use base pay ; they do not include overtime or bonuses.
The next component in determining your workers compensation insurance quotes is the experience modification rate (EMR), which compares your company's annual losses in insurance claims against similar businesses. An EMR of 1 is average and you'll probably receive a worker's comp quote similar to what the insurer is charging other businesses like yours. If you're under or over the average, your premium will be adjusted accordingly. See Part II of this series to learn how you can prevent claims and achieve a better EMR.
Workers compensation insurance underwriters are generally authorized to adjust your premium by plus or minus 25% from the basic rate. These are called credits and will vary from insurer to insurer. When you get workers compensation quotes for your small business, be sure to ask the different companies about their credit policy and how you can increase your credits.
As with all insurance for small business, you should review your workers compensation policy every couple of years (more frequently if your business has changed) and get competitive bids for workers compensation insurance. Shop for workers compensation insurance bids online and save time.
See Part III of this series to learn how to save money on workers compensation by managing claims.
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