How to Get Workers’ Comp Insurance

Topics: Workers' Compensation

Summary: Workers’ compensation insurance provides protection for employees who are injured on the job. Learn how to get workers’ compensation insurance to keep your business protected, where it is mandated by state and tips for how to purchase the right coverage for your organization in this article.

How to get workers' compensation insurance

Starting a small business comes with its fair share of risks – financial, operational, strategic – the list goes on. There are numerous decisions a small business needs to make in order to achieve success, and one of those is determining your insurance needs to protect your property, products and most importantly – your employees.

If you are looking for information on how to purchase workers’ comp insurance for a small business, this blog post will help walk you through what you need to know and how to get started. First, let’s begin with a little background.

What is Workers’ Compensation Insurance?

Simply stated, workers’ comp insurance provides protection for people who are injured during the course of their employment. It can be due to an accident, like falling from a ladder or sustaining a cut, scrape or burn. It can also be the result of a repetitive injury from performing the same arm motion over and over. The goal is to get your employee back to work and provide protection against the loss of income.

Workers’ compensation insurance offers five basic benefits:
  • Medical care for the injured worker
  • Temporary disability benefits to make up for lost wages while the injured employee is recovering
  • Permanent disability benefits (either partial or total) if an employee suffers a permanent impairment
  • Supplemental job displacement benefits, which pay for skill enhancement or retraining if the injured worker cannot return to the job they had before the injury
  • Death benefits paid to a spouse, children or dependents if the worker dies as a result of job-related injury or illness

Getting Started with Workers’ Comp Insurance for Small Business

Now that you understand what workers’ comp insurance is and how it works, let’s talk about how you can get it for your small business. Here are tips to get started:
  • Research the workers’ comp laws in your state – this is important if your business operates in a state-funded workers’ comp area, or if you are in a state with a monopolistic state-fund – more details on that below.
  • Gather pertinent financial records for your small business, including payroll figures and estimates for the next calendar year.
  • Keep a copy of your mission statement or a description of your business handy – this may be necessary when evaluating your small business's coverage options.
  • Contact an insurance broker or agent. An experienced agent (such as an AmTrust Financial-appointed one) can walk you through the buying process and help you understand the various laws, class codes and underwriting involved with workers’ compensation insurance.
  • Some agents specialize in working with specific fields/trades and may have additional knowledge and experience servicing your business type.
  • Ask about risk management services and support.
  • Discuss payment of policy, such as direct debit and premium financing. For example, AmTrust offers PAYO® (Pay-As-You-Owe®), which provides your business with a simplified payment solution.

Important Factors to Remember for Workers’ Comp

Some states (WA, ND, OH, WY) have monopolistic state-run workers’ comp, in which coverage is provided by the government rather than a private insurance company. Additionally, some states have monopolistic state-funded workers’ comp coverage – meaning that the state only allows a business to purchase their coverage from a state-funded program. To find out more about the regulations for your specific area, visit the U.S. Department of Labor's State Workers' Compensation Officials website and click through to your state's site.

Things to Consider When Choosing a Workers’ Comp Carrier

Financial Strength of Carrier

While workers’ compensation coverage is statutory, meaning you don’t have to worry about how much coverage to buy, you need the carrier to be financially sound. This assures you they will be able to pay claims when they arise. AM Best is one reputable rating service. For instance, AmTrust has an “A-“ rating, which is considered “excellent.” AM Best also rates the financial size of a carrier based on its cash reserves to pay claims. Look for a rating of 10 or higher (note that financial size ratings are listed in Roman numerals – for example, AmTrust has a financial size of “XV”).

Helpful Tools and Resources to Manage Your Business

Carriers vary on the level of convenience services they offer to help you run your business and minimize workers’ comp claims. Examples include an online portal for viewing claims and access to loss control resources, such as safety presentations, online safety training videos, and more – to improve workplace safety protocols and even on-site assessments to identify risks and help formulate safety strategies.

Additionally, a carrier’s ability to handle claims is an important factor to consider. A good insurance carrier will handle claims “aggressively” – meaning they take an approach that meets both the employee and the insured's needs. They will also work efficiently to get to a closed claim – one that works out for the employee and the company, and gets the injured worker back on the job in a timely, safe manner.

Workers’ Compensation Insurance Rates

Striking the right balance between cost and convenience offerings is key – going solely on the basis of the lowest rate can be a mistake if you are compromising other important factors of a carrier’s offerings; however, if a carrier’s premium is 25% above the other options, it could push you well beyond your small business’s budget.

There are notable differences among workers’ comp carriers. Be sure to discuss your options with your insurance broker or agent to find the best fit for your small business.

AmTrust for Small Business Workers’ Compensation Coverage

AmTrust is a leader in workers’ compensation insurance for small to mid-sized businesses. Reach out to your insurance agent or contact us today to find out how we can design specific insurance packages to fit your needs.

This material is for informational purposes only and is not legal or business advice. Neither AmTrust Financial Services, Inc. nor any of its subsidiaries or affiliates represents or warrants that the information contained herein is appropriate or suitable for any specific business or legal purpose. Readers seeking resolution of specific questions should consult their business and/or legal advisors. Coverages may vary by location. Contact your local RSM for more information.

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