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Ask an advisor: What is Workers Compensation coverage, and why does my business need it?

From time to time on the blog we’ll be answering some of the most common questions we are asked regarding insurance coverage.  Today’s topic is workers compensation  coverage.

What is workers compensation insurance?

Workers compensation insurance is a form of health and disability insurance specific to injuries that occur in the workplace.  It provides payment for medical benefits, disability, and some wage replacement for employees injured on the job.  When available, it also is usually the “sole remedy” available to employees, meaning that except for extremely rare circumstances, they cannot sue the employer for injuries, but have to work within the workers compensation system.

Why does my business need workers compensation coverage? 

For starters, it’s required by law for most employers.  Regulations vary from state to state, but in Georgia employers who regularly employ 3 or more people (including the owners) must provide workers compensation coverage by law.  In Alabama and Tennessee the threshold is 5 employees, but if you don’t purchase coverage, employees retain the right to sue the employer for workplace injuries.  Here is a link for requirements by state.   “Regularly employing” can mean someone who only works part-time on the weekend, so this covers the vast majority of businesses. Failure to do so in Georgia is a misdemeanor and can result in up to a $5,000 fine per violation.

How much does it cost?

Costs for workers compensation coverage can vary tremendously.  We have some clients who pay less than $1,000 annually and others that pay in excess of $300,000 annually.  Pricing is based on three main factors.  First: type of work- for example, a receptionist is much less likely to suffer a serious injury than a roofer.  Second: payroll by type of work, as payroll usually roughly correlates to number of employees and hours worked.  Finally, claims history factors heavily into policy premiums.  Insurance companies factor in claims history, particularly the frequency (number of claims) and severity (dollars paid) of injuries.  Additionally, every employer’s claims history is benchmarked against others in their industry through an Experience Modifier rating (more on this in another blog post).

How can I reduce my workers compensation costs?

This is where working with an experienced advisor at Jowers-Sklar Insurance will really help you.  Although much of the costs associated with workers compensation insurance are unavoidable, we have been able to significantly reduce our clients’ premiums through common-sense loss control, medical bill review, referrals to occupational medicine specialists, drug-free workplace certification, return to work programs, and other tools.

Of course every client’s needs are unique, so we take a comprehensive approach to help your company reduce claims.  This in turn makes you a more attractive risk to insurers and drives down your costs.  And most significantly, it allows your most important assets- your employees- go home to their families healthy and whole.

At Jowers-Sklar Insurance, we strive to serve as your advisor and advocate and to help you easily navigate the complexities of workers compensation insurance so you can keep your focus on the main thing- growing your business.  Let us show you the difference we can make for your business.  

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