5 Tips For Employers on Workers’ Compensation Coverage

Almost all employers are required to carry Workers’ Compensation insurance coverage. There are a number of workers’ compensation rules that may not be clear to employers.

Listed are five tips to better manage a Workers’ Compensation policy:

1. Gauging Payroll on the Policy – When a policy period ends, you may be subject to an audit to calculate actual payroll for the term and determine your premium. The frequency of audits is contingent on your premium; with those less than $3,500 being subject to review every three years. Be proactive in managing your records: if higher than estimated, you will owe an additional sum; if lower, you’ll receive a return rebate.
2. About Audits – Take these seriously, as they can result in a substantial increase if not addressed. If an auditor finds an owner to be unresponsive, the audit with automatically be processed with a 50 percent increase in payroll.
3. Inclusion, Exclusion and Election of Coverage Form – Workers’ Compensation policy laws vary by state. You may be legally required to submit an Election of Coverage Form to the insurance bureau in your state. To confirm the choice to include or exclude has been properly documented, contact your insurance representative. They will provide assistance by accurately completing documentation to help avoid penalties.
4. Cancelling A Compensation Policy Mid-term – A policyholder may choose to cancel their policy at any time by giving written notice to their insurer. It’s actually a common practice in the industry for a ‘short rate’ fee, which is usually a sliding percentage based on how long the policy has been held. Insurance companies issue policies for 12-month period, working in costs for quotes and individualized research. The short rate penalty encourages policyholders to keep their policy a full year.
5. What is Experience Modification?  – After a few years of business and reaching a certain premium size, an experience modification will be calculated for the owner. If an owner has better than average losses for their class and state, they will receive a discount (vice versa for lower than average losses). Having a reputable claims handling group will also keep a modification low because a claim mishandled by the adjusting firm will be reflected on the actual business’s costs.

If you need help understanding Workers’ Compensation policies, contact The Firm at 843-720-2800.