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Workers Comp

from Southern Insurance Advisors

Workers’ compensation coverage pays for medical care and physical rehabilitation of employees injured at work and helps to replace lost wages while they are unable to work. Additionally, this coverage protects an employer from being sued by an injured worker in most cases.

SIA can help your business find complete solutions to your unique workers compensation insurance needs. We’ll find solutions that create safer and more productive workplaces, more confident and secure workers, and overall savings that you'll see on the bottom line.

Coverage for office workers using their own vehicles on company business is often needed as well. If you have employees, it is critical that you consider workers comp coverage.

Employers have a legal responsibility to their employees to make the workplace safe. However, accidents happen even when every reasonable safety measure has been taken. To protect employers from lawsuits resulting from workplace accidents and to provide medical care and compensation for lost income to employees hurt in workplace accidents, businesses need workers compensation insurance. Below you'll find out more about what Workers Compensation covers, who Workers Compensation covers, and how to determine how much it costs.

What Does Workers Compensation Cover?

Workers compensation insurance covers workers injured on the job, whether they're hurt on the workplace premises or elsewhere, or in auto accidents while on business. It also covers work-related illnesses like asbestos poisoning for instance. Workers compensation provides payments to injured workers, without regard to who was at fault in the accident, for time lost from work and for medical and rehabilitation services. It also provides death benefits to surviving spouses and dependents.

The amount of lost wages or disability benefits provided by the policy is governed by the state. Each state is different. In Georgia, workers' medical expenses are covered 100% up to the policy limits. The employer may be responsible for a deductible if they choose to have one, but the employee is never out of pocket. In Georgia, the employee is also given 2/3 of their normal weekly wages up to $500 per week after a two week waiting period.

Workers compensation insurance must be bought as a separate policy. Although Businessowners Policies (BOPs) are sold as package policies, they don't include coverage for workers' injuries.

Who Does Workers Compensation Cover?

Employers are responsible for anyone they compensate to perfom work on their behalf. That includes owners and officers of the company, employees paid on a W-2 tax form, AND subcontractors paid on a 1099 tax form. In Georgia you are only REQUIRED to carry a workers compensation policy if you have three or more employees. This does not mean that you will not be held liable for injury to your employees while they are on the job if you have only two employees. It simply means you are not required to carry coverage for it. When counting employees officers and owners of corporations and LLCs count so don’t forget to count yourself. For example, a company that is an LLC with two partners and one part time employee has three employees and is required to carry workers compensation by Georgia statute.

How Much Does Workers Compensation Cost?

Workers Compensation policies are rated based on employee class and payroll. The first thing that the insurance company does to determine the cost of the policy is to classify all of your employees into groups. If you run a construction company, they would classify together the carpenters, the plumbers, the masons, the electricians, the clerical office staff, the supervisors, the outside salespeople and so on until all your employees are classified. Once the employees are grouped into class codes the insurance company assigns a rate to each class based on data about the claims that people in that profession usually incur. A roofer may have a 40% rate while a plumber has a 10% rate while a clerical office employee has a 0.3% rate (just examples). The insurance company then takes the payroll and multiplies it by the rate. If you have $100,000 of roofing payroll, $100,000 of plumbing payroll, and $100,000 of clerical payroll they would add up $40,000, $10,000, and $300 and your policy would cost $50,300 per year.

When the policy is initially purchased, these payroll figures are just estimates. After 12 months has gone by, the insurance company will either do a telephone audit where an insurance company professional calls you, a mailed self audit where you're sent paperwork to complete on your own, or a physical audit where a representative from the insurance company will come to your offices to review the information needed. The intent of the audit is to compare the beginning of the year payroll estimates to the end of the year actual results. If you estimated too high, you get a refund from the insurance company. If you estimated too low, you get a refund. After the audit is complete, the insurer will also adjust the next year's policy to reflect the past year's audit results. So, if you had a policy in 2007 and you estimated $100,000 in payroll and an audit was completed in 2008 to show you actually had $200,000 in payroll, you'll get a bill from the insurance company for around double of what your premium was initially. At the same time, they'll adjust your 2008 policy to reflect $200,000 in payroll and you'll be sent a bill for that premium too. So, beware underestimating your payroll or be ready for a double whammy when the audit is completed. The good news is that the rate you're being charged is very plainly stated on the policy so you know exactly how much you'll be charged at the end of the year if you blow away your payroll projections.

The final thing you need to know about the cost of Workers Compensation is whose payroll to include. Owners and officers of the company have the right to reject Workers Compensation benefits if they choose. By waiving their right to recover medical costs and disability among other benefits, they also waive their payroll in the premium calculation. So, if an officer is included in coverage, include their payroll. If they're excluded from coverage, exclude their payroll from the calculation. All employees paid on a W-2 should be properly classified and included no matter if they're part time or full time. If they have split job duties then they should be rated as the most expensive class. For example, if one employee is a roofer 10 hours per week and a sales person 30 hours per week, they should be rated as a roofer. Finally, any subcontractors (those you pay on a 1099 tax form) who do not have their own Workers Compensation policy must be included in the payroll amounts. Uninsured subcontractors would be covered by your policy if they or their employees were injured while performing work for you. Because they would be covered, their cost (labor and materials) should be included in your payroll amounts. If they have their own Workers Compensation insurance and they supply you with a Certificate of Insurance, you do not have to include them in your payroll. Total up your included officers, employees, and uninsured subcontractors, and that's your payroll subject to Workers Compensation premium calculations.

A Certificate of Insurance is an industry standard form used to show a summary of a company's insurance policies to a third party. For example, if a security company wants to handle security for a nighclub, the nightclub would ask the security company to carry liability coverage to protect against negligence by the security personell. The nighclub would then ask the security company for a Certificate of Insurance as proof that the appropriate insurance coverage has been obtained. Here are a few quick notes about Certificates. First, they should always come directly from the insurance company or agent. Some companies who don't carry teh right insurance coverage may try to falsify their Certificate. Getting it from the agent or insurance company should solve that problem. Also, the dates on the certificate should always include the dates where the subcontractor is working for you. If the subcontractor's certificate shows policies good through May 1 2009 and they did work for you from Februrary 1 2009 - June 1 2009, you need to get evidence that they still had covereage from May-June. Finally, you need to keep the Certificate on file at least until you receive your completed insurance audit if not much, much longer. For more information on certificates and even to get a sample to give to your subs, talk to your SIA agent today!

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