Crisis can hit any small business at any time. Unforeseen circumstances, such as the recent pandemic, can force businesses to temporarily close their doors, leaving their owners wondering how to stay afloat. In cases like this, it is only natural to want to find ways to save money. One of the first things you might consider doing to save some pennies is to cancel your insurance policies. But before you do that, you need to know how that will end up costing you more in the long run. Here are 5 reasons why you should think twice before canceling your commercial insurance.
1. You Probably Won’t Get a Full Refund on Your Premium
There is no penalty for canceling, but you will not get a full refund on your paid premiums.
Let’s say you’ve only had your commercial insurance for a few months out of the year when a crisis hits and you need to temporarily close your business. You might think that canceling your insurance will mean getting a refund on the remainder of the premium that you’ve paid for the year. But that is generally not the case: there is usually a penalty for early cancellation of your policy.
It should come as no surprise that insurance companies have ways of protecting themselves against customers buying insurance, using it once, and then dropping it. One way they do this is with a minimum earned premium, which is the minimum amount an insurance company is willing to take for writing a policy. For example, if you have a policy with a $500 yearly premium and you cancel 6 months into the policy, you would get $250 back if there were no minimum earned premium. However, if there is a minimum earned premium of $300 on your policy, the most you could be refunded is $200. Some policies do not have minimum earned premiums, while some have 100% minimum earned premiums, so check your coverage. And don’t forget that most of the taxes and fees you’ve paid on your policy are never refundable.
2. You’ll Pay More to Restart Coverage
If you’re viewing your closure as temporary, remember that, when you reopen, you’ll need to purchase insurance again. This might not seem like a big deal; after all, you’ve already gone through the process once. But there is a problem with canceling and repurchasing commercial insurance: insurance companies view businesses that have had a gap in coverage as more of a risk to insure. This translates to an automatically higher premium for you when you decide to buy insurance again.
If you lose your permit or license, then you will have to shut down your business.
3. You Might Lose Your Permits or Licenses
Does your business require special licenses or permits? At the very least, you probably needed to obtain a business license when you opened your business. Getting those permits and/or licenses was probably time-consuming at best, and a downright pain at worst – and remember that you probably needed proof of general liability or workers’ comp insurance to get those permits or licenses. If you cancel your business’ insurance policies, you risk losing the permits and licenses you worked so hard to get, and you might need to go through the process all over again. In some cases, you might even struggle to get them back: for example, if you own a restaurant with a liquor license, you might end up losing it to another business, since there are only a limited number of them given out in each city.
4. Your Property Will Be at Risk
An empty business, such as a storefront, will always be at risk of theft and vandalism, even if you’ve boarded it up and protected it as best you can. Your commercial property insurance is what protects you from having to pay for damaged or stolen property; without it, you’ll be left with all the bills.
5. You Could Find Yourself in Default
If you’re like most small business owners, you rely on one or more types of financing: a mortgage on a property, or a lease on equipment. Before you cancel your insurance policies, be sure to check the fine print of your mortgage or lease – you might find that not having insurance will mean defaulting on your loans, even if you’re up-to-date on your payments. You could lose your workspace, or have your valuable equipment repossessed, simply because you don’t have the required insurance policies.
Falling on hard times or facing a crisis is never easy. But add to the mix the business you’ve worked so hard for, and you may end up having to make some difficult choices. One thing to remember, though, is that your commercial insurance policies are there to protect your business, and any money you may save by dropping them can end up being canceled out in the long run. If you need help, or have any questions regarding any type of commercial insurance, EZ.Insure is here with the answers. Speak with your own personal agent, any time, for free. To get started with us, simply enter your zip code in the bar above, or you can speak to an agent by calling 888-615-4893.
Accidents happen. If an employee gets hurt at work, not only can you lose a lot of money in a lawsuit, but you can lose your business as well. The best way to protect yourself is with a Workers’ Compensation Insurance Plan. This will protect your business in the event of an employee’s injury or death at the workplace. EZ.Insure knows how important your business is, and we want to protect your business from a lawsuit that could happen at any point in time.
What Is Workers’ Compensation?
If an employee gets hurt on the job, it can end up costing you your business if you are not insured.
Often referred to as “workers comp,” every state has made it mandatory to provide this type of insurance program to employers. The insurance serves both the employee as well as employer; it assures injured employees that they will receive the compensation and medical care needed until they are able to go back to work.
This also protects employers from a lawsuit when an employee is injured on the job. Every state has its own regulations for the program, and while some have a federal insurance plan, some businesses choose private insurers.
The Different Types Of Benefits
In most cases an employee will receive benefits whether the disability is permanent or temporary. Some states will allow the employee to be compensated for the time out of work, while others specify a maximum number of weeks for temporary disabilities.
An injured employee will receive:
Medical Care
Replaced Income
Retraining Costs, if necessary
Also, if killed on the job, then eligible dependents will receive workers’ compensation for generally 500 weeks at the wage of the deceased employee.
Benefits For Your Business
Workers’ compensation insurance protects your business from a lawsuit when someone gets hurt on the job.
When you purchase Workers’ Compensation Insurance, you are purchasing protection for your business. Your business will receive many benefits that will keep it from going out of business. The different benetis are:
Protection from lawsuit or large financial loss
Coverage for legal costs
Coverage for certain types of illnesses and injuries
Coverage for funeral expenses and dependent support
Coverage for a percentage of reimbursed wages to employee
When you purchase worker’s compensation, it’s good to be aware of your state’s specific requirements and laws. Make sure you’re up to date with the current insurance policies so that if something were to happen, you know exactly what to talk to your employees about.
EZ.Insure understands that businesses need to be informed to make the best choices for their future. We provide you with a highly trained agent with your region that will answer any questions you have, compare different plans for you, and even sign you up when you’re ready, free of charge. You will never have to worry about being hounded by endless calls when you use EZ.Insure. We promise to offer straight to the point, no-hassle, accurate quotes in order to help you protect your business. To get started simply enter your zip code in the bar above, or you can speak to an agent by emailing [email protected] or calling 888-350-1890. We look out for your business as if it was our own.
Do you know everything you need to know about Worker’s Compensation? It’s not a subject many people discuss at the dinner table, but it’s incredibly important to have when running a business in case someone is injured. A small thing like a loose nail or an unstable walkway could spell trouble.
It’s easy to be happy when you know you’re covered!
Before an accident happens, it’s imperative for a business owner to understand the terms of Worker’s Compensation coverage, how to qualify as an employee, what it covers, and what it will cost you.
What Is “Worker’s Comp?”
This agreement states that as long as an employee receives wage replacement and medical benefits, the employee will not sue the company for negligence. Meaning, if you’re injured on site due to something workplace related, you’ll be covered for the amount of work you miss plus hospital bills. But, you cannot sue the company specifically for failing to take proper care. This protects employers and employees.
It’s state-mandated, and the particulars change based on your location. EZ.Insure’s agents are familiar with this information, local or not, so by calling us, you’re saving some time.
Good news is, safety regulations are solid nowadays.
Your employee may have questions for you during this time. EZ.Insure will give you the knowledge to answer securely.
How Can Your Employee Qualify?
For an injured employee, there are only four checkboxes to qualify:
You must be employed by the company.
Your illness/ injury must be work-related.
Your case must fall in state guidelines.
The employer must have Worker’s Compensation insurance.
What Is / Is Not Covered by Worker’s Compensation?
Workers Compensation insurance covers most workplace injuries, but you may be refused assistance if your injuries are self-inflicted, occurred during a crime, or if your actions during your sustained injury violated company policy. For example, if your employee happened to sustain an injury while robbing you, rest assured their injury most likely won’t be covered.
The injured employee doesn’t need to be injured “on-site” to be covered. Worker’s compensation can also come into place when your injury is sustained, and it’s job-related. This could be if your company plans a trip overseas for a meeting, and your employee happens to break a limb during the outing.
When it comes to your medical expenses, you’ll find support with diagnosis and treatment. Depending on your state, it can also provide disability payments, rehabilitation, or retraining.
This should provide ample cushion for your employees to recover and return to work.
What Are the Costs?
The average cost of a worker’s compensation claim is $38,000 (from 2005). This is a combined total of both the medical side and loss in productivity. That’s a down payment for a house or a mid-size car.
For a company, the average cost per $100 in employee wage ranges from $0.75 to $2.74. It doesn’t seem that bad, but this does depend on the state. If you’re looking into getting this for your company, contact your local office to get specific information.
Do Worker’s Compensation Costs Change Per Business Type?
Depending on what your company does is how much you’ll be quoted for worker’s compensation.
Depending on your company, the money outflow is going to fluctuate. For example, in the office building, your cost per $100 goes down to about $0.12. It doesn’t sound that bad, but it’s because injuries happen less often in this environment.
If you’re a painter or a landscaper, this average jumps up to $7-9/$100. You’ll have to take a look into the work you’re doing, and how it may affect an employee. Your business needs a strong hand with inside knowledge to provide you with the best quality insurance.
EZ.Insure has the experience to help you excel. Your agent will answer any questions you have, compare different plans for you, and even sign you up when you’re ready, free of charge and without having to worry about being hounded by endless calls. To get started simply enter your zip code in the bar above, or you can speak to an agent by emailing [email protected], or calling 888-350-1890. EZ.Insure makes the entire process easy, and quick.
No matter what type of business you own, if you have employees, you’ll need workers’ compensation insurance. Workers’ compensation, also known as “workers’ comp,” is a legally required type of insurance policy that pays benefits to your employees in the event that they are injured on the job. It functions as a disability insurance fund, providing monetary compensation, healthcare benefits, or both, to employees. Workers’ compensation guidelines vary by state, so check out our workers’ compensation state pages to find out how your state handles workers’ comp regulations.
The majority of workers’ compensation policies are funded by premiums the insurance carrier collects from you as the business owner. When disagreements arise, the Workers’ Compensation Board, the state entity that manages the program, steps in to handle them.
There are different types of workers’ comp, depending on your industry, with some policies administered by the government in special cases. For example, government employees, longshore and harbor workers, and energy workers are all covered by federal workers’ compensation programs. And for coal miners and their families, the Black Lung Program administers death and disability benefits.
Benefits of Workers’ Compensation
Workers’ compensation benefits may include a portion of lost wages for the time your employee was unable to work. Reimbursement for medical services and occupational therapy may also be paid to your injured employee.
Salary Replacement
In most cases, a workers’ compensation applicant will get some replacement for their lost wages. But it will usually be less than their full pay. The majority of policies cover roughly two-thirds of the beneficiary’s gross pay. Although the payout is often not taxable at the state or federal levels, recipients who receive money from the Supplemental Security Income or Social Security Disability programs may have to pay taxes on those benefits.
Medical Expenses
Workers’ compensation insurance also offers coverage for medical costs associated with an illness or accidents sustained at work. This may include trips to the hospital, surgeries, and medication. In the case of workplace-related illnesses or injuries that are so serious that they require multiple treatments, workers’ comp will cover ongoing care. It will also cover repetitive injuries that manifest over time.
It’s important to note that the majority of workers’ compensation policies only cover medical costs for injuries sustained directly as a result of working. A construction worker, for instance, could seek reimbursement for injuries sustained in a fall from scaffolding, but not for those sustained while traveling to the job site.
Disability Coverage
Some workplace accidents could be severe enough to render your employee permanently or temporarily disabled. In this case, your disabled employee may be eligible for benefits under your workers’ compensation policy to assist with paying their medical expenses and to partially make up for lost wages.
Survivor Benefits
Workers’ compensation can help pay for funeral costs, as well as pay survivor benefits to your employee’s dependents if your employee passes away as a result of a work-related incident.
Types of Workers’ Compensation
Each state is responsible for enforcing workers’ comp laws. There are no federal standards for this type of insurance, so depending on your location, the same injuries may result in radically different types of compensation.
But, when it comes to policy types, there are two types of workers’ compensation policies you can buy for your staff:
Coverage A – This type of policy includes all of the basic state-mandated benefits that an injured or ill employee is entitled to. In addition to salary replacement payments, it also includes any necessary medical treatment, rehabilitation, and death benefits. These benefits are available in every state, with the exception of Texas. Although the payouts vary greatly from state-to-state and are not always available to all employees.
Coverage B – This type of policy provides benefits over the basic minimum required, as offered by Coverage A. With coverage B though, employees are typically only compensated following the employee’s successful lawsuit alleging negligence or other wrongdoing.
In most states employees forfeit their right to hold their employer accountable for negligence by agreeing to receive workers’ compensation. The goal of this wage agreement is to safeguard both employees and employers. In exchange for assurance of payment, workers forgo additional recourse, and employers accept some liability in order to avoid the possibly higher costs of a negligence action.
Even though employees who receive workers’ compensation typically consent to a “no-fault” contract by giving up their right to sue their employers, state legislation and court decisions in certain jurisdictions have restored employees’ abilities to file lawsuits in a number of strictly limited situations. So, depending on where your business is located, you may decide to buy insurance that combines Coverage A and Coverage B.
Who Is Covered by Workers’ Compensation Insurance?
Who must be covered by workers’ compensation insurance depends on a number of factors—the size of your company, and the types of employees you have. For example, in some states, a company must have a certain minimum number of workers before it is required to have workers’ compensation insurance. And, while regulations vary by state, in the majority of states, all full-time employees are required to be covered by workers’ compensation insurance. Workers’ compensation regulations for independent contractors, temporary employees, and interns vary by state.
The industry you work in also makes a difference. For example, in certain states, coverage for workers’ compensation is not necessary for:
Farmhands
Insurance agents
Family members under a certain age
Casual workers
Business owners and partners
Real estate agents
Additionally, employees of the federal government are not protected by state-mandated workers’ compensation insurance. They are instead covered by federal workers’ compensation.
You should be familiar with the workers’ compensation regulations in your state, because these exceptions do not apply in every state.
The Cost of Workers’ Compensation
Workers’ comp insurance premiums are generally set based on every $100 of your company’s payroll. Even so, it’s difficult to pinpoint an exact price without evaluating the different factors for your specific company. On average you can expect to pay anywhere from $0.60 to $2.27 per every $100 on your payroll.
To understand how the cost of your workers’ compensation insurance will be determined, you need to understand a few basic components of the equation:
Payroll
Every workers’ compensation insurance rate is calculated by dividing your payroll by $100. That means the more employees you have, the higher your rate will be. It’s important to keep in mind, though, that you’ll need coverage in some states as soon as you have a single employee, while in others you won’t need it unless you have three or more employees.
Depending on the regulations of your state, you might have employees who do not have to have coverage. For instance, you are probably not required to obtain workers’ compensation for yourself as the business owner. The same often holds true for company executives and limited liability company (LLC) members.
Workers’ Compensation Industry Classification
Certain industries pose higher risks than others. For example, someone working on oil rigs have a substantially higher risk of serious injury than an office worker. Workers in some professions, including contracting and building, run an increased risk. Which drives up the cost of insurance for those people.
States provide a class code for each type of industry. And each code is then given a base rate based on its risk for injury. 38 states employ class codes that were created by the NCCI. Others make use of independent rating agencies, while some have developed their own systems.
Employee Modification Rate
The EMR is a multiplier that represents the history of your claims. Your state workers’ compensation board or its ratings bureau compares your prior workers’ compensation claims to those of businesses in your industry to determine your EMR. Businesses with lower EMRs often pay less for their workers’ compensation insurance, with the typical range of EMRs being 0.75 to 1.25.
Workers’ compensation insurance premiums vary from state-to-state because state laws regulate coverage. The cost of workers’ compensation will most certainly be higher in a state that provides higher or more payments to injured workers, or in a state with a lot of high-risk industries.
Several states though, give employers discounts if they take steps to increase safety and decrease claims. For instance, many state governments offer discounts for setting up safety committees, fall prevention programs, and drug-free workplaces.
Insurance Carriers
While most of the above factors are out of your control, you can still find the best price for your business by shopping around among different insurance carriers. Although this isn’t a universal rule, some workers’ compensation insurance carriers charge higher premiums than others.
The Calculations
The basic formula for estimating workers’ compensation costs takes into account your industry, past claims, and total payroll. The basic formula is your annual employee payroll divided by 100. That sum is then multiplied by the workers comp insurance rate. That total is the estimated cost of your workers compensation premiums.
There are many moving parts in the precise formulas that insurers use to compute your workers’ compensation premium, and the methods they use to do so can differ from one insurer to another. Additionally, these formulas are based on your state-specific workers’ compensation regulations.
You should also take into account that there will be an option to pay your premium annually or monthly. This decision can also affect your price.
You should also consider any adjustments that might be made to your payroll during the year, including changes in your number of employees, your business class code, and your workers’ compensation rate, in order to choose the appropriate payment method for your company.
How to Save on Workers’ Compensation Insurance
The best way to make sure you can get affordable workers’ compensation insurance rates is to reduce the number and cost of your workers’ compensation claims.
You won’t have many options for cost-cutting when an employee submits a claim. To avoid having to pay large premiums in the future, you must put your plans in place as soon as possible.
You should think about implementing the following steps, which could be beneficial to both your company and your employees:
Return to Work Programs
Return to work programs help you get your employees back to work as soon as they are healthy enough.
A return-to-work program might help an employee ease back into their old responsibilities gradually, rather than having to wait until they’re fully recover to handle them. Until they are able to return to their regular tasks, the employee may perform light or modified work.
As part of this program, your employee can receive new training in a different skill set in order to earn their regular pay, instead of the lower rate provided as part of their workers’ compensation claim.
The advantage of this program is that you save money on wages given to any temporary workers you would have had to recruit to cover for your injured employee while they were recovering.
Work Safety Initiatives
The easiest way to reduce the price of workers’ compensation insurance is to avoid work-related illnesses and injuries as much as possible.
To motivate your employees to maintain a safe workplace and lower injury risks, be proactive about encouraging workplace safety measures. Here are some actions you can take to encourage a safer workplace:
Conduct regular safety training – Reaffirm best practices for conduct and safety, and keep on top of employee training for things like equipment usage.
Create a welcoming environment with an open door policy – It should be easy for your employees to approach you with questions about their safety. Remind them to visit you if they want to discuss workplace safety. Pay attention to their concerns, then take appropriate steps to reduce the risks and guarantee the safety of your staff.
Be open and honest about workers’ compensation benefits – When you hire new employees, you should tell them about your company’s policies on workers’ compensation. To remind current employees how workers’ compensation works if they are hurt on the job, arrange an employee benefits refresher.
Your team will feel more at ease and valued if you communicate openly and honestly about the policies you have in place to safeguard and promote their safety.
FAQs
Who pays workers’ compensation premiums?
By law, you as the employer pay the workers’ compensation premium. You can not deduct workers’ compensation payments through your employee’s paycheck.
Who is exempt from workers’ compensation?
Most of the time, only your employees can get workers’ compensation. Contractors or freelancers are almost never included in your plan. Aside from that each state makes its own laws. Arkansas, for example, does not require farm workers or real estate agents to have workers’ compensation.
How many employees do I need to get workers’ compensation insurance?
Every state has different requirements for workers’ compensation. Some states have you get coverage with even 1 employee while others require 3 or more.
Keep in mind that workers’ compensation insurance exists to safeguard both your company and your employees. EZ’s experienced representatives are here to answer any additional questions you may have about the specifics of workers’ compensation in your state or industry. Call 877-670-3538 to be directly connected to one of our agents who can help answer any questions you may have.
