When it comes to workers’ compensation insurance, rate shopping doesn’t work. That’s because the rates are set by law. Keep reading to learn what you can do to save money instead.
Workers Compensation Isn’t Optional
The one thing you can’t do is choose to go without workers’ compensation insurance. If you have employees in Wisconsin, you must carry workers’ compensation insurance if you have three or more employees. If you have employees in other states, virtually every other state has its own worker’s compensation requirements — sometimes even if you only have one or two employees.
Further, going without workers’ compensation is bad for business. Workers’ compensation covers things like medical bills and lost wages when your employees get hurt on the job. Those are things most employers would cover anyway, and they’re also things that your employees could potentially sue you over if you didn’t provide them with any kind of coverage.
Workers Compensation Depends on Your Industry and the Job
Like other types of insurance, workers’ compensation is all about figuring out risk. In this case, it’s the risk of injury. Companies in riskier industries will pay more for workers’ compensation. For example, a construction company will typically have higher rates than a company full of office workers. Within industries, individual jobs also determine rates with riskier jobs paying higher rates. For example, the cost of a construction company’s bookkeeper might be less than the cost of an office building’s window washer.
Every job and industry gets assigned to a classification code. The classification codes help standardize things when different companies doing the same thing might describe themselves and their employees in different ways. You can look up the classification codes in a table to see what you’d pay for each employee you have.
Your Claims History Determines What You Pay
While worker’s compensation has standard base rates, your individual claims history still determines what you pay. Just like a driver with more accidents pays more for car insurance, a company that has more accidents pays more for workers’ compensation. Similarly, just like there are safe driver discounts, if you have a strong record for safety, you could end up paying less.
Calculating your final rate based on your claims history is fairly simple. You need to figure out your experience modification rate. If you have an average number of claims, your mod is equal to 1.0. A mod of greater than 1.0 means you have an above-average number of claims, and a mod below 1.0 means you have a below-average number of claims. Multiply your mod by the rate in the classification table to determine your rate.
How to Get the Best Workers’ Compensation Rate
If you want to get the best rate for workers’ compensation, you need to become the best at safety. That means providing the right equipment, making sure your employees are well-trained, and making safety an important part of your company culture.
Your insurance agent can help you with all of these steps. Contact us to learn more about how to be the best at safety and lower what you pay for workers’ compensation.