Insurance for Worker's Compensation

Workers Compensation Insurance is something that every company has to maintain, but how do you budget for it? Find out some tips and tricks.

Every employer that has employees must have a Workers Compensation Insurance Policy. The Policy is designed to provide coverage for the employee who is hurt or injured at the workplace. Each State’s Insurance Commission is responsible to ensure that all insurance policies issued to employers in their states provides the necessary coverages that each state requires. Each State will furnish the Insurance company a standard rate for each Workers Compensation Class Code. The Workers Compensation Class Code for Florist is 8001. Statistics are kept for each Class Code as to amount of premium charged and the number of claims processed. The more riskier class codes like construction over 2 stories rate could be as high as 40% compared to the Florist Class code of about 5%. The reason is if a construction worker falls from 2 story building, the workers injury will be more substantial than a florist cutting their finger.

What is the cost of a Workers Compensation Insurance Policy? Good question, although there is a policy minimum, there are three or four factors to compute up the cost of the policy.

First, what is the amount of payroll paid during the policy year.

Second, What Class Code(s) are used and what is the rate.

Third, what is the company’s experience modification rate. Each employer develops an experience modification rate and that rate will change on an annual basis based on the amount of premiums paid and the claims paid. Example, if an employer paid $2,000 in premiums for Workers Compensation Insurance Policy and the insurance company paid out $500 in claims for injuries during the year, the loss ratio is 25%. The loss ratio may reduce your experience modification rate.

Fourth – Discounts, some insurance companies will give the florist a discount for drug testing and or having a safety program.

Let’s look at the Formula and compute up the annual cost.

Annual Payroll paid in 2017 $70,000

Florist Class Code 8001 Rate is 5.00 per $100. In payroll (5.00%)

Standard Premium would be $3,500

Experience Modification Rate is .90 (that good, you want to be under 1.0)

Adjusted Premium is ($3,500 times .9 or 90%) or $3,150.

Less Discounts of 5% (safety & drugs) $157.50 (adjusted premium $3,150 time 5%)

Net Premium $2,992.50

Please keep in mind, each state is different with rates for Class Codes, Experience Modification and Discounts. Contact your Insurance Agent for rates.