Understanding Your Workers’ Compensation Coverage Costs

For business owners, workers' compensation insurance can be a significant expense. The cost of your workers' compensation premiums may feel arbitrary and out of your hands, but when you understand the ways that you can reduce your costs, it makes it easier to deal with. Here's a look at a few of the things that you need to understand.

Your Salaries Contribute To Your Costs

In most cases, workers' compensation premiums are set at a specific percentage of your company's total salaries for your employees. As a result, it is important that your company accurately assess each worker in terms of their legal employment status. Full-time versus part-time status — as well as independent contractor status — are all relevant when calculating your workers' compensation policy premiums. Independent contractors are excluded as their pay is not a salary expense, so make sure you account for all of them properly so that you do not include their pay in your workers' compensation salary reporting.

Employee Risks And Designations Matter

The percentage that the insurance company uses to determine your premium will depend on the industry your business is in, the risks associated with each employee's job, and the number of employees you have in high-risk positions. Make sure that every employee's job description is accurate, every job title is properly assigned, and you have a clear picture of the structure of your employees before you submit the information for your premium quote.

Enforce Safety Rules To Minimize Claims

Your company's workers' compensation claims history is another important factor when you're identifying the elements of your policy premium. The more your company has paid out in workers' compensation claims, the higher your risk factor. That means you'll pay more in premiums for your policy. You can reduce this by making every possible effort to ensure overall safety on your job sites, which will reduce claims and associated costs. Prevention is key when it comes to workplace safety, so provide ongoing education, establish strict safety regulations, and conduct routine safety audits as well.

These are some of the most important elements to think about when it comes to your company's workers' compensation premium costs. The more you understand about these elements, the easier it is to cut costs and still preserve the protections that your business needs. Talk with your workers' compensation insurance agent about any other factors that could be contributing to your policy premiums and any discounts you may qualify for.