Injuries and illnesses occur in the workplace, most often due to unsafe working conditions. This is especially true in high-risk industries such as construction. When an employee becomes injured or falls ill, he (or she) can typically apply for workers compensation insurance. As a business owner, you may be wondering what your state and industry’s specific requirements regarding workers compensation are and exactly how much this type of insurance costs. Here is a closer look at this subject.
Factors That Influence The Cost Of Workers Comp Insurance
The total cost of workers compensation insurance can vary depending on several factors. However, we will focus on four particular factors: your company’s annual payroll, the history of claims against your business, the type of industry your organization belongs to, and the state where your employees work.
One of the main factors that influences how much you pay in workers comp insurance is the number of employees you hire. This figure may vary significantly from one year to the next due to many reasons (layoffs, retirements, creation of new positions, etc.). If your company reduces its number of employees by 50% (or, conversely, doubles its staff), the cost of workers comp insurance will be notably different due to this change alone.
History Of Claims
According to the Insurance Information Institute, employers with an annual insurance premium above a given quantity typically qualify for “experience rating.” This process adjusts the premium (higher or lower) depending on a business’s claims history and how it compares to other companies in the same industry. It’s important to note that “claims history” and “experience rating” have more to do with the number of claims filed against you (the employer) than the total or average dollar value of these claims (i.e. loss severity).
The cost of a workman’s compensation claim also depends on your industry and the type of work your employees do. According to the National Safety Council, the average cost for all workers comp claims combined in 2016-17 was $40,051. Data from the National Council on Compensation Insurance (NCCI) also revealed that in 2016 and 2017, the most costly lost-time workers comp claims were those relating to injuries resulting from motor vehicle accidents, with an average of $78,293 per claim.
Injuries and illnesses are also extremely common in high-risk industries such as construction, forestry, fishing, healthcare, and manufacturing. According to data from the Bureau of Labor Statistics, 47% of all fatal work-related injuries in the United States in 2018 were suffered by construction workers (1,008 in total). By contrast, the risk of injuries and illnesses in office jobs such as accounting and customer service is much lower.
State Where Employees Work
Just as workers compensation costs vary by industry, the total sum you ultimately pay may also depend on the laws in your state. In many states, businesses with one or more employees are required to carry this type of insurance. However, certain states such as Alabama mandate that companies with five or more employees must carry workers comp coverage. In many states, sole proprietors, freelance workers and household cleaners are exempt from workers comp requirements because they are typically compensated by contractual arrangement (as opposed to salaried employees).
How Workers Compensation Premiums Are Calculated
The value of your workers comp insurance premium is a specified rate for every $100 of your business’s payroll. This amount is also determined partly by the kind of labor your employees perform and partly by your experience rating. Put simply, the formula for calculating this type of premium is:
Premium = Type of work done by employees (Classification rate) x Experience rate x (Payroll / 100)
Speak To Experienced Business Insurance Brokers
Reach out to the experienced business insurance brokers at Southern States Insurance in Alpharetta, Georgia for more information on the cost of workers compensation insurance. Since our founding in 1992, we have grown to become one of the largest, privately-held independent insurance agencies in the Southeastern U.S. We work with nearly every major insurance carrier and are dedicated to helping our clients obtain the greatest possible value.
At SSI, we place a large emphasis on diversity of options and on forming deep, long-lasting relationships. Our workers comp insurance policies are designed to meet your unique needs and budget, and are among several other different types of insurance we offer (general liability, business property, business auto, group health, cyber liability, and employment practices liability insurance). Regardless of the situation your business may find itself in, our agents will work tirelessly to help you achieve your objectives. Call Southern States Insurance today at (888) 800-4824 or contact us online to learn more about our business insurance products.