Article Reviewed by a licensed insurance professional: Sam Meenasian (CA dept of insurance license #0F75955).
Estimated reading time: 9 minutes
We all know just how expensive it is to run a business. However, insurance premiums can sometimes feel like the last straw when your renewal bill shows up each year. Small businesses and contractors are often really flustered by the cost of insurance for their business, which might explain the large number of businesses that are unfortunately operating without insurance each year.
You need to have insurance coverage for your business for so many reasons. It is never advisable to operate without it. And thankfully, there are some really easy ways to limit the cost of your policies so that you can be sure that your business is protected without breaking the bank.
What Does Workers’ Compensation Really Cover (And Why It’s Worth Every Dollar You Spend)
Workers’ compensation is not only required by law in most states, but it is also a critical aspect of protecting your business from harm. If you have employees who get hurt on the job, you need to be able to cover their medical costs, lost wages, and their vocational training if they cannot go back into the same field they worked in before.
This can amount to thousands of dollars for even a single accident. If you don’t have thousands of dollars in savings that you can pay out yourself to cover the costs for injured workers, then you need insurance protection to cover these costs.
Premiums for workers’ comp policies are based on payroll figures. That means that the more people you employ, the higher your costs will be. You need to expect that higher-risk professions will cost more to insurance per $100 of payroll than businesses where risk is quite low. However, there are still ways to bring down the costs for your policies so that you don’t have to choose between having coverage and not having it.
Get Classifications Right The First Time
Misclassification is one of the main reasons that businesses run into expenses they weren’t expecting. You need to be sure that you have your staff categorized correctly so that you are paying the right premiums for their coverage. Office workers fall into a different class than people who install roofs, for example. The risk of both jobs differs, and the fees to protect these workers also need to differ for good reason.
If you have a small company and your office assistant gets coded like your other workers that are out in the field, you are overpaying for this one person, but that can really add up over the course of the year. Likewise, if you categorize roofers like office staff, you are underpaying and will be charged a fee to “catch up” on back premiums after an audit.
Pro Tip: Review classifications annually and make sure that you tell your insurance when job roles change.
Build a Culture of Safety
One of the most important things you can do to keep your premiums down is to prevent accidents on the job from happening. The more accidents that you report as claims, the more your premiums go up. Here are some things that you can do to foster a culture based on safety at your place of business.
1. Report injuries right away. Delays will typically lead to higher payouts as well as issues with affording the cost of treatment for the injured person.
2. Have a return-to-work program that allows workers to come back to work on light duty as soon as it is reasonable for them to do so. This shows good faith, and it also helps to get people back to work, which saves money on lost wage costs.
3. Work with your injured workers throughout the claims process. Staying in touch with injured workers can have a big impact on their morale and also the outcomes of their journey back to work.
The National Council on Compensation reports that businesses with proactive policies related to claims management are likely to reduce their EMR by as much as 25% over time.
Hire Smarter and Not Faster
All businesses face times when they absolutely need more staff members, and they cannot seem to hire quickly enough to keep up. However, when you rush your hiring process, you can run into issues with incorrect hiring processes as well as problems with reporting to your insurance.
There are clear results in studies that show that younger staff members who are new to their jobs are far more likely to be hurt on the job than older workers who have been with the company for a longer period of time. More than 40% of workers under the age of 35 get hurt during their first year of employment.
Training, supervision, and care when hiring can help you save money on your premiums.
Audit Your Payroll
Workers’ comp premiums aren’t cheap. That’s why it’s well worth the time and trouble to verify on a routine basis that your payroll is accurate. You will be overpaying for premiums if you are not auditing in some cases, while in others, you might not be paying enough and end up being audited for back premiums.
The better you are at staying on top of the payroll figures that are reported to your insurance company, the more accurate your premiums for workers’ comp coverage will be. Overtime needs to be separated properly per your state of operations as well, so be sure that you are calculating this pay properly.
Work With an Independent and Skilled Agent
Your best bet for getting affordable premiums for your business insurance is to work with a skilled and experienced agent who is not attached to a specific insurance business. Having an agent shop around for the best premiums is key to getting a great value for your buck.
Think of this person as your matchmaker for quality insurance. They will take all of the variables of your needs into account and help you get the right insurance coverage for your kind of company and the team of workers who need to be covered.
Use Technology to Track Claims and Safety
Modern risk management tools are available to everyone these days. You don’t have to be a giant company to get access to data tracking tools that will help you know what’s going on with your business inside and out. You can track everything from safety training to incident reports with these tools, which makes it easier than ever to be sure that you know if your business is operating safely or needs work in this area.
Tools like SafetyCulture(iAuditor) and EHC Insight are perfect for tracking these kinds of incidents, and they make it simple to check the status of your business’s safety operations on devices like your phone or tablet.
Work With a Payroll or PEO Expert
Payroll is a lot of work. If you are not familiar with the process of payroll, you should strongly consider working with a provider who does this for a living. This business will tackle your payroll for you for a reasonable fee, and you will have peace of mind that your payroll figures are always right. You can then take these accurate payroll calculations and send them to your insurance company to find out what your adjusted rates will be.
Many insurance companies look very favorably on this process of maintaining payroll, as it makes mistakes less frequent, and it also protects your business from things like embezzlement.
Keep Communication Open
When your staff feels like they can voice opinions, they are far more likely to report issues with safety or cultural problems that might lead to accidents and injuries. Having open communication between management and staff at every level of your company is a critical aspect of good safety protocol, and it can help you to reduce your premiums in a big way each year.
Ask About Discounts and Credits
You should always check with your insurance carrier about discounts associated with safety programs, drug testing programs, and other kinds of protocols that are proven to prevent accidents at work. Some carriers will also provide access to dividend programs that give you back a portion of your premium in cash if you stay within a certain threshold related to accidents.
Don’t Neglect Small Injuries
Even a little accident needs to be reported. Sometimes, small injuries are not as small as they seem at the time. A cut on a finger might not seem like a big deal. That is, until it gets infected or it doesn’t heal properly. Report all incidents and record them to be sure that you aren’t opening yourself up for lawsuits or more expensive claims down the road.
Key Takeaways:
1. Make sure your classification codes are correct. Misclassification is more costly than many businesses realize.
2. Have and maintain a safety culture that helps prevent accidents.
3. Make sure that your EMR stays low to keep your premiums low.
4. Train and onboard properly, and make sure that new staff are not left all alone to get in trouble or get hurt.
5. Audit your payroll regularly.
6. Work with insurance pros who can find you affordable premiums for your specific business niche.
Why Does All of This Matter?
Here is the cold, hard truth of the matter: insurance companies will always reward safety-focused businesses that don’t have to submit that many claims each year. You need to be sure that you are keeping your workplace safe to be able to avoid increased costs for your necessary insurance coverages.
If you are trying to do too many things for your business, you can easily make payroll mistakes or safety culture errors that will lead to accidents on the job, and through these accidents, increased premiums. Controlling your costs means having things in good order each day in your business.
Why You Should Work With USA Business Insurance
USA Business Insurance understands how to keep premiums low for businesses. We have worked with companies in every business niche there is, and we work with business owners across all 50 states. We know and understand what it takes to keep your premiums low, and we are happy to help you shop around for the best prices for your company’s essential insurance coverage.
We don’t just sell policies to people. We help them to build businesses that can thrive. We will be happy to provide you with a quote and get started on the business of finding you the right insurance policies for your specific needs and goals.
