Your business is growing, you’re hiring or expanding your market, and you need work comp. (Congrats!)
Workers’ compensation insurance can be confusing to understand and challenging to buy, particularly for small business owners. We’re here to help.
WorkCompOne has helped thousands of small business owners buy workers’ compensation coverage, many for the first time. Follow this step-by-step guide to shop for your growing business.
Note: This walks you through how to buy workers’ compensation insurance. Want to know more? Read The Small Business Owner’s Guide to Workers’ Compensation Insurance >>
Workers’ compensation is a set of legal requirements that protects workers, by paying for treatment, rehabilitation, lost wages and/or death benefits if they’re injured or killed on the job. Its origins in the U.S. date back to the early 20th century, and it incentivizes employers to maintain safe workplace conditions.
Workers’ compensation insurance, which is often also called workers’ compensation, workers’ comp, or work comp, is a commercial insurance policy that covers the expenses mentioned above.
By purchasing a policy for its employees, an employer can file a claim when a worker is injured, and the insurance carrier will compensate the employee for medical bills and lost wages. The policy also pays the legal fees of the employer, if the employee sues for additional damages.
For example, your work comp policy would kick in if:
Workers’ compensation coverage is almost universally mandatory. Nearly every employer in the U.S. is legally required to carry a current workers’ compensation insurance policy for its workforce. But it can be confusing to navigate, especially for first-time buyers.
(Want a super-simple explanation? Check out The Absolute Beginner’s Guide to Workers’ Compensation)
Here’s what you need to know to get the right coverage, so your business is both compliant and protected.
Most employers must carry workers’ comp coverage, but the specific workers’ compensation requirements vary from state to state. That’s because state law dictates its own workers’ compensation system.
Find out what your state requires before you start shopping, so you know for sure if you need it and which employees must be covered. The most common factors that differ from state to state include:
Keep in mind that even if a business isn’t legally required to carry coverage, the employer may still be held liable if a worker is injured on the job.
If any other requirements apply to your business, a commercial insurance rep familiar with your state work comp system can guide you in the right direction.
To learn more: What Are the Workers' Compensation Laws in My State?
Whether you need work comp insurance depends on the number of employees you have, but your premium will be based on your payroll. Specifically, the payroll for each type of job your employees do.
Here’s how it works.
For an in-depth explanation of how workers’ compensation premiums are calculated, read Workers' Compensation Insurance Cost Calculator: How Much for a Small Business Policy?
The insurance rep may ask you additional questions about your employees, like if they travel for work or routinely work from home. From there, your business will be assigned Class Codes, short for Classification Codes. These numeric codes are used nationwide to categorize employees, and knowing them will make it easier to renew or shop for insurance in the future.
To learn more: How to Calculate Workers’ Compensation Cost Per Employee
Based on your state regulations, you should now know where you can purchase an insurance policy. Your available choice(s) may be:
Most small businesses will start shopping with their local broker or insurance agency. However, many independent agencies can’t or won’t write work comp because it’s often more difficult and less profitable work for them. An agency that specializes in work comp can provide the guidance and policy you need.
Check that your selected insurer is licensed to write in all states where you need employees covered - that is, all states where your employees perform work.
To learn more: An Entrepreneur’s Guide to Small Business Insurance
Almost there! Many traditional insurance agencies and carriers require you to call or meet in person to review your information, ask follow-up questions and submit your information to the carrier’s underwriters. (Underwriters, in short, determine whether the carrier can cover your business, and how much your premium will cost.)
Newer agencies are using technology to serve small businesses online and on their schedule. Emerging insuretech tools are making every step in the process easier and faster: from getting a quote and a certificate of insurance, to paying your premium or submitting a claim.
Here’s what to have in front of you:
That’s it! Depending on the agency, receiving a quote could take under an hour, or up to several business days.
Rate: The base price of coverage for a workers’ compensation policy.
Experience Modifier: If you’re asked about an Experience Modifier, this probably doesn’t apply to you - yet. Once you’ve been in business and held work comp coverage for several years, you may be assigned an Experience Modifier. This is a number that applies a mandatory debit or credit on your premium. It compares your history of claims to similar businesses.
Loss Runs: Same thing with Loss Runs. These apply to more complex business with higher premiums. It’s a claims report that show all claims that have been paid on your behalf for a specified period of time.
To learn more: 7 Tips for Buying Work Comp Insurance
The cost of a workers’ compensation insurance policy depends on several factors, including business size (total payroll), location, industry and claims history. In general, a small business with $100,000 in payroll might pay a few hundred dollars to a few thousand dollars annually on workers’ compensation insurance.
We’ve written a lot about workers’ compensation cost to make it more clear and transparent for small business owners shopping for coverage. To learn more about average workers’ compensation cost for small businesses, workers' compensation insurance rates, how to estimate your premium and tips to buy affordable workers’ compensation coverage, read: How Much Does Workers' Compensation Insurance Cost?
That’s all there is to it. And WorkCompOne makes it simple with an easy, five-step process. Interested? You can get started on a free, no-obligation quote on your next coffee break.