If one of your employees has a work-related injury or illness, workers’ comp can help them navigate through their treatment & recovery. A couple examples that could lead to a claim could be an employ suffers a serious cut requiring stitches while using a sharp tool or slipping on a wet floor and injuring their back.

​Workers comp can help train employees in new job roles if they can’t return to their old job. Also, if they can’t return to work they could receive disability payments.

An additional note, workers comp doesn’t just provide benefits to the employees but protects your business from a major financial burden and from being sued by the employees involved.

Insurance carriers use a number of various factors to calculate up with your workers’ compensation insurance cost, such as your businesses:

• Industry type

• Amount of payroll

• Employees’ type of work

• Claims history

Every business is unique. So your businesses needs and your costs will most likely differ from other similar businesses.

In most states’ workers’ comp is required. Each state will define what businesses are required to have workers’ comp. In some states some business may not be required to have workers’ comp until they have 3, 4 or 5 employees. Checking your states workers’ comp laws can be a good resource. Workers’ comp insurance can be purchased a variety of ways and depends on your state. See below for ways this insurance may be purchased:

• Private workers compensation companies: States regulate private insurers and these companies set their prices approving & declining customers based on their individual risks profile. You may get better customer service and rates from private insurers than with the state-funded programs.

• Competitive state-funded workers’ comp: This is when the state-funded program competes directly with the private insurers for customers.

• State-funded workers’ comp: When you can’t find workers’ comp insurance elsewhere with private insurers than your state-funded workers’ comp program can provide your business coverage.

• Monopolistic state-funded workers’ comp: Business in North Dakota, Ohio, Washington or Wyoming are required to purchase coverage through their state-funded program.

• Employee classification codes (class codes): These are assigned by your state workers’ compensation board or by the National Council on Compensation (NCCI). Each employee is assigned a class code based on the work they perform in your company. The more risk the employee is exposed to during their work the more expensive the premium will be.

• Payroll: Each class code is assigned an individual rate that is per every $100 of payroll. As an example, compare the rate for the class NCCI code 9586 at $.58 per every $100 of payroll vs. the NCCI code 9102 at $3.62 per $100 of payroll in 2022. 

• Claims experience modifier (MOD): This takes into account your business’ history and loss history. In turn, the safer a business operates the lower the experience modifier will be. Not every business will have an experience modifier and is subject to state requirement.

• A workers’ comp audit is a review of your end-of-year records. It’s done to verify the amount of insurance paid for matches what it should’ve have been. Audits may be via mail, online or in person it depending on the type of business & auditor. Keeping records of payroll for each job function will help during audit time.

  The audit is also the time they asses if your business used subcontractors and did the subcontractors have their own worker’s comp insurance. If not, your business may be charged for payments made to uninsured subcontractors during that policy year. Be sure to get proof of workers’ comp coverage prior to subcontractors working for your business.