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Workers Comp Insurance – How to Get the Best Rate

Workers comp insurance can be one of the most expensive policies for a small business owner. Knowing how to get the best workers comp insurance rates can help reduce one of your biggest overhead expenses. Sometimes what can also add to your workers comp cost could be the inherent workers comp insurance fraud that is found in many industries. Let’s look at some historical numbers. It is not a matter of if but when you will buy workers comp insurance over the life of your business and having some basic understanding of workers compensation insurance coverage will help you in the long run.

Workers comp insurance laws vary by every state. Every state requires workers compensation insurance to be in place if you have employees. Most states have state workers comp insurance carriers that are quasi- public entities. You cannot purchase workers’ compensation from a private insurer in the 4 “monopolistic” states (North Dakota, Ohio, Washington, and Wyoming). The states’ laws do not allow it.

In California Corporate Officers of Private Corporations that own 100% of the Corporation are not covered by the Workers Compensation law but they may elect to be covered.

All other corporate ownership situations are covered and may not reject coverage. Corporate officers of a public corporation or officers of a private corporation that do not own 100% of the corporation are covered and may not reject coverage.

One way to get the best rate would be to get proposals from both the state and private insurance companies for workers compensation insurance. There are pros and cons for using either the state or private carrier.
For industries that utilize subcontractors, another way to cut cost would be to require a workers comp insurance waiver from your subs. Otherwise, if you do not do this you will be responsible to pay the premium for the workers compensation for all of your subs.

Employers workers comp insurance might be endorsed to cover your exposure for volunteer laborers. If you utilize interns and/or other volunteers your business having your workers compensation policy properly endorsed to provide coverage for these exposures can protect you from having gaps in coverage.

Another way to save on your workers compensation insurance costs is in an indirect way by investigating the loss ratios of the companies you are getting proposals from. The last four years have seen a dramatic increase in the loss ratios for workers compensation insurance companies across the United States. Specifically in California, the overall workers compensation loss ratio in 2005 was 54%. In 2006 it had risen to 70% loss ratio. In 2007 again it increased to 93%. Finally, in 2008, the last year for which data is available, the overall loss ratio for workers compensation in California is 111%. Thus, if the companies you are getting proposals from have high loss ratios chances are you’re not going to get very competitive pricing. That is because the insurance companies need to over compensate for past losses in order to become profitable and sustainable in the marketplace.

Utilizing a few of these time-saving ideas can have a great impact on your bottom line.

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