As a business owner, worker's compensation insurance is essential. Not only are most companies required to have it, but it's an essential investment to protect against financial losses if an employee is injured. If you're in the market for worker's compensation insurance for your business, you need to understand what affects the rates that you'll pay. Here's a look at some contributing factors to your company's worker's compensation policy.
What State Is Your Business In?
Most employers assume that worker's compensation insurance is a federal program, but the fact is that it's actually regulated by the state. Every state manages its own worker's compensation insurance program and sets the requirements for that coverage and the businesses that must have it. As a result, you might find that the premiums you pay for your policy are higher or lower than a business in a neighboring state.
What Industry Is Your Business In?
Another key component of your worker's compensation insurance cost is the industry that your business is in. Businesses that operate in high-risk industries or that handle dangerous tasks will pay more in their worker's compensation insurance premiums because those employers are at higher risk. Their employees are more likely to get injured on the job, and the more likely you are to need that insurance coverage, the greater your risk factor. If your business is an administrative or general retail operation, you won't have that same risk factor.
What Kind Of Claims History Do You Have?
Have you ever had worker's compensation insurance before? If you have, your insurance premium might be affected by the claims history you've had. An employer with a track record of worker's compensation claims and frequent worker injuries will pay a higher premium because of the higher risk factors associated. However, if you're new to worker's compensation insurance or you've never filed a claim, you'll often see the benefit of that in lower premiums.
How Much Is Your Payroll?
Your total payroll cost is another determining factor for your worker's compensation insurance rate. You'll pay more in premiums if you have higher payroll levels because that typically corresponds to more employees. If you're looking for ways to manage your worker's compensation insurance, reducing payroll costs is one of the ways that you can directly affect insurance costs.
The more you understand about what contributes to these premiums, the easier it is to appreciate what you're paying every month. Talk with a local worker's comp insurance agent today for more information and to get the coverage that your business needs.