When you run a business, you must take specific steps to protect yourself and your employees from the financial costs associated with accidents and illness. One of those steps is to purchase a workers’ compensation insurance policy.
This type of policy provides coverage for medical expenses and lost wages for employees injured or ill due to their job.
But before you can purchase a policy, you must first understand how a worker’s compensation insurance company calculates your premium.
This way, you’ll be better prepared to make an informed decision when purchasing your workers’ compensation insurance policy.
Here’s a detailed breakdown of how workers comp insurance providers work out the premiums charged to customers!
Type of Industry You Operate In
The type of industry you operate in plays a vital role in determining your worker’s compensation insurance premium, as insurance companies consider the likelihood of workplace injuries for different industries and use this information to set their rates.
For example, if you operate within the construction, logging, or mining sectors, you may face a higher premium than a company in the retail sector.
Your Track Record
Another factor that insurance companies consider when calculating your workers’ compensation premium is your track record.
If you have a history of workplace injuries, you may face a higher premium, as the insurance company will need to cover the cost of any potential claims. On the other hand, if you have a good safety record, you may be able to get a better rate.
Insurance companies may also look at the types of injuries you’ve had. For example, if you’ve had many repetitive strain injuries, you may face a higher premium, as these types of injuries can be costly to treat.
How Many Employees You Have
The number of employees you have is another factor that insurance companies consider when calculating your worker’s compensation premiums.
Generally speaking, businesses with fewer than 20 employees typically face lower premiums than larger companies. This is because the risk of a major workplace injury is much lower for smaller businesses.
However, it’s important to note that your number of employees is just one factor in determining your premium. Insurance companies also consider the types of jobs your employees do and the potential for workplace injuries for those jobs.
The Workplace Safety Measures in Place
If you have taken steps to reduce the risk of workplace injuries, such as installing safety equipment or conducting safety training sessions, you may get a better rate on your workers’ compensation insurance policy.
This is because workplace safety policies will make employees less likely to sustain work-related injuries.
Industry and Location
Workers’ compensation insurance premiums are influenced by the industry and location of a business. Certain industries, such as construction or manufacturing, have higher injury rates and more hazardous working conditions, leading to increased risk. Additionally, geographical factors, such as state regulations and regional trends in workplace safety, can impact premium calculations.
The size of a company plays a role in determining workers’ compensation premiums. Larger companies with a higher number of employees generally have higher premiums due to the increased potential for workplace injuries or illnesses. Smaller businesses, on the other hand, may have lower premiums if they have fewer employees and operate in industries with lower risk levels.
When purchasing a workers’ compensation insurance policy, understanding how insurance companies calculate your premium is key.
While there is no set premium, the amount is typically based on several factors, as highlighted above. By understanding how insurance companies calculate your premium, you’ll be better prepared to make an informed decision when purchasing your workers’ compensation insurance policy.