How to Lower Your Workers' Comp Insurance Costs

If the law says you need workers' comp insurance--and in most states, it does if you have three or more employees--you may think you're stuck with the premium you're quoted. Not so. Some creativity and attention to detail can mean plenty of savings. These tips can help you save on workers' comp premiums while still providing your company and your employees the coverage you need:

- Classify employees correctly. Your workers' comp policy shows classifications, job descriptions and estimated payroll. Review it for accuracy, and contact your agent or carrier with questions or to make clarifications or changes.

- Consider a deductible. Typically, workers' comp covers from first dollar, but most states allow deductibles, which earn you premium credits. Consider your claims history and the amount of the credit when making your decision.

- Drop your own coverage. Many states let owners or corporate officers take themselves out of the workers' comp policy. That could lower costs, but would also mean you wouldn't be covered for an on-the-job injury. Make this decision based on the type of business you're in and the work you do. If you work primarily in an office or low-risk situation, this could be a good idea. But if you spend most of your day on construction sites or other potentially hazardous locations, your own coverage could be worth the cost.

- Ask about merit rating credits. In many states, smaller businesses that typically pay $5,000 in premiums or less may be entitled to a credit of 5 to 15 percent if they have not had any lost-time claims during a period designated by the carrier. Talk to your agent or insurer about what's available and how you qualify.

- Start safety and drug-free workplace programs. These programs may qualify for premium credits. Most workers' comp insurance companies assist their policy holders in establishing and maintaining such programs. Also, keep in mind that in addition to saving you on workers' comp premiums, these programs can be beneficial in a variety of ways, such as creating a more attractive environment to top workers and as a marketing tool with safety-conscious customers.

- Keep accurate payroll records. Insurance carriers deduct "excludable compensation" (such as the difference between base and overtime pay, tips and some other forms of compensation) from your payroll to determine your premium, so keep detailed records. You need to report more than just the total wages you paid.

- Shop around. There was a time when all carriers charged the same rates, but those days are gone. Shop around for the best rates and support services.

 

The Author is the editor of Flash newsletter. Flash is a comprehensive information resource for business owners and managers who want to take their operation to the Flash.