Workplace accidents can happen anywhere, even in the safest industries and with the most safety-aware employees. Not being ready to address them can land you in a fix as an employer. You must have an emergency response plan in place to handle such situations. Most importantly, you need insurance coverage to get through the financial implications of worker injuries.
Workers’ compensation insurance is your savior. Besides covering the medical expenses, rehabilitation costs, and lost wages of sick and injured employees, it keeps you on the right side of the law. Nearly every state in the US makes it a legal requirement and levies penalties on businesses that fail to get it, leaving no room for non-adherence.
According to statistics, the average cost of workers’ compensation insurance in the US is $ 45. However, it may vary according to factors like location, size, and annual payroll. Estimates suggest that coverage costs about $1 for every $100 in payroll. But you cannot take a one-size-fits-all approach to workers’ compensation insurance because adequacy criteria vary from business to business.
Let us help you understand whether you have enough coverage and how to optimize it.
Ensure Coverage for All Essential Elements
Workers’ comp is essential for all businesses as it reduces employer liability for work-related injuries and illnesses. If you fail to cover your business, your employees can sue you for their injuries and illnesses. You will eventually have to compensate for their medical expenses and lost wages. Paying a few hundred dollars as an annual premium every year is far better than spending thousands on lawsuits and claims.
Adequate coverage for your business gives you peace of mind as you need not worry about the massive financial burden of workplace injuries. But everything boils down to buying a policy that covers all the necessary elements.
Here are the ones your insurance plan should cover:
- Medical expenses, including emergency room visits, prescriptions, and surgeries where necessary
- Ongoing care costs, such as rehab and physical therapy
- Replacement for lost wages
- Illnesses and repetitive strain injuries due to the nature of work
- Short- and long-term disabilities
Consider the Features of Your Insurance Plan
Besides assessing the basics of the coverage, you must consider the features of your insurance plan to ensure sufficiency. A guaranteed-cost workers’ comp plan is the most common option to cover the risks of on-the-job injuries and illnesses. With these plans, you pay a fixed premium amount during the policy, regardless of the number and value of losses occurring in the policy term.
Prescient National recommends that business owners consider a loss-sensitive program. These plans set the cost according to the track record of claims. With this feature, you can do your bit to lower the premium value. Steps like training employees and enforcing workplace safety guidelines can help you reduce the cost of insurance without compromising coverage.
Research the Location-Specific Requirements
The adequacy of workers’ compensation insurance also depends on your business location. For example, businesses in North Dakota, Ohio, Washington, and Wyoming have to buy worker’s compensation from a state fund, which often costs more than coverage from a private insurance company. The average cost in California runs at $ 62 per month, which is far more than the national average.
Workers’ comp premiums may be higher in states with a higher risk of natural disasters and catastrophic events. Paying more makes sense because you need extra cover to deal with the additional risks. Experts recommend digging deep into the location-specific requirements to ensure that your coverage is enough to address them.
Pay Attention to Risk Levels
The industry-specific risk level is another factor that determines whether you have enough workers’ insurance coverage. Businesses operating in a high-risk vertical such as construction or contracting can expect higher premium bills. The rates are relatively lower in segments like IT and consulting, where employees are less likely to sustain workplace injuries and illnesses.
Providers use the class codes of the National Council on Compensation Insurance (NCCI) to calculate workers’ compensation insurance premiums for businesses. Class codes are based on the type of work and corresponding levels of risk. Notably, several states, such as California, Delaware, Indiana, New Jersey, New York, North Carolina, and Washington, do not use NCCI class codes for insurance calculations.
Summing Up
Workers’ compensation insurance is your first line of defense against the financial implications of work mishaps and illnesses. You must think beyond only buying coverage to fulfill compliance requirements and get enough to build a low-risk business with ample coverage. Consider it a savvy investment against the unknown and unforeseen dangers you may encounter in the future.
