Workman’s compensation insurance. You’ve heard me mention it before. I’m sure you’ve heard lots of people mention it before. I’m going to explain briefly what work comp insurance is, give you a brief overview of it and we’re all going to do additional videos on how you generate the premium for work comp, or how the premium is calculated.

But, to start off, with work comp insurance covers your employees in case they’re injured on the job. So, while they’re working on behalf of you, the employer, if your employees are injured while at your office, at a job location, or perhaps they’re traveling. The point is, if they’re injured while they’re working for you, the employer, they’re covered.

Now, states require this coverage. There’s a mandatory coverage usually called “statutory limits.” Those limits are the minimum insurance required for each state. Talk with your insurance agent. They can let you know what those are.

The point is, though, without this coverage, you will get fined by the state if you have employees who are working without work comp insurance. Or worse yet, if one of your employees gets injured and you don’t have work comp insurance, you can be sued. That’s going to be a big issue if you don’t have the right coverage.

Now keep in mind, as an employer you don’t have to carry work comp on yourself. So, you can save some money there. Many employers actually opt out of the work comp coverage for themselves because they may have coverage through a health plan or some other way to provide for their injuries in case they’re injured while on the job. So, keep that in mind that you don’t need that necessarily if you are the employer.

We’re going to do an additional video on how the work comp premiums are calculated. So, take a look at our Website at Philleo.com to see that additional video.

But again, work comp insurance is designed to protect the employees, paid for by the employer, very important. Have it or the state is going to fine you.

So, you understand you need to have Worker’s Comp Insurance because you viewed our video on Worker’s Comp Insurance.

Now, the biggest question to you is, “How much is this going to cost me and my business?” Well, Work Comp is not like a generic policy where you just go out and you buy a policy for Work Comp.

Work Comp is specifically rated and there’s two factors that go into rating it. The first one is what kind of work are your people doing? Someone that’s working inside of an office has a very, very low hazardous job. Someone that is a steel worker, trimming trees, putting on roofs, those are all very high hazardous jobs and the chance for those people to get injured are much more than, let’s say, the office worker.

So, the rate for those types of jobs is going to be much more expensive than an office worker. So, the first thing is what type of job they’re doing. That’s called the “classification” and there’s different codes for every job. Your agent should be able to help you find the appropriate code for your business.

The next thing that Work Comp is based off of, it’s based on payroll. The higher your payroll, the higher your Work Comp. Work Comp goes, it’s based on every $100 of payroll you have, they assign a figure to that and that’s how much they charge you for Work Comp.

When I say “they”, I mean state. The state sets the rate on this. So, it doesn’t matter which insurance company you go to because the rates are going to be the same with every single company. The insurance companies just administer the program.

So, how much is your payroll and what type of work are they doing? Those are the classifications that are going to matter to how much you pay. Now, an agent should be able to help you determine the appropriate classification and then help you get a rate on that.

A couple of quick things on which company you choose. If your payroll is large enough and your premiums are high enough, you may be eligible for what’s known as an “experience modification.”

So, if your losses are better or worse than the average of people in that classification, you may get a lower rate or you might get a more expensive rate depending on your experience.

Experience modification is only assigned after a company has been in business for several years and they have developed a track record.

The next thing is being able to get a dividend. Some insurance companies will give you money back from your Work Comp policy if you didn’t have a claim or if you didn’t have many claims. Those are called dividend.

Again, if your account is large enough, the insurance company may offer you a dividend. A good insurance agent will talk to you about that and incorporate that with the rest of your business insurance.

Usually, the best way to do that is make sure your Worker’s Comp insurance is with the same carrier that you have the rest of your business insurance with.