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9 years ago · by · 0 comments

Workers Compensation – What Determines My Premium?

Scurich Insurance Services, CA, Workers CompensationIn California, nearly all employers – even those who have only one employee – must provide workers’ comp insurance. However, there could be exceptions for farm workers or family members. While such insurance is often viewed as being a vehicle that protects and serves the employee, having this insurance also prevents the employer from being sued if a worker is injured during the course of their job duties. This helps to protect the long term health of the business. Employers in California are responsible for paying the full cost of the premium for workers’ comp insurance.

Although the factors that determine the premium that must be paid are variable, there are three primary ones: the business classification code, the business’ safety record and its experience modification.

  • The business classification code is a code or a combination of codes that describes your business operations. Restaurants, for example, have different risks than construction companies and hair salons, though they do share some of the same issues as well. The higher the risk for injury to employees while on the job, generally the higher the premium the employer faces.
  • A business’s safety record that reflects compliance with industry standard safety practices involving equipment and procedures will reflect favorably on its premium. Conversely, a poor safety record or a company that is out of compliance with OSHA regulations will likely face higher premiums until the issues are addressed for several billing cycles.
  • The experience modification involves the number of claims against the workers’ comp insurance. The fewer the claims against this
    insurance, the lower the premiums will drop over time while more claims will increase the cost of workers’ comp.

Other factors that are often used to determine the cost of an employer’s workers’ comp insurance. These include special dividend or group programs the business might be eligible for as well as underwriting adjustments that are out of the ordinary such as using a health care organization that is certified.

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10 years ago · by · 0 comments

Preparing for your workers’ compensation premium audit can save you money

Scurich Insurance Services, CA, Workers CompensationWhen your insurance company issued your Workers Compensation policy, you paid an estimated premium for the term of the policy. This rate was based on the nature of your business and your estimated payroll. However, once your policy expires, the insurance company conducts a premium audit to gather data about your actual costs for the applicable policy term. If there is any shortfall, you are responsible for the difference between the original estimate and actual premium.

Naturally, you want to keep the difference between the estimated and actual rate as low as possible. Consider the following list of tips:

  • Have all necessary records available for the auditor.
  • Break down your payroll by classification code so that the auditor doesn’t have to classify any unexplained payroll. Leaving the decision up to the auditor could result in having the payroll placed in the highest classification.
  • Separate overtime wages from regular wages. This allows the auditor to discount the overtime wages back to regular wages.
  • Exclude tips, severance pay, meal and travel advances and bonuses paid for inventions, because none of these are included in Workers Compensation premium calculations.
  • Divide uninsured subcontractor billings into material and labor costs since you are only required to pay premiums for labor. If you don’t have an actual split, figure on 50% for each. One important exception to this is for heavy equipment operators who are employed as subcontractors. In this case, use a third of their total billings as reportable labor costs.
  • Don’t include short- or long-term disability payments in the data given to the auditor because these are excluded from premium calculations.
  • Be sure to cap all covered officers’ payroll at the maximum for your state.
  • Exclude wages paid to employees who are on active military duty because their wages aren’t included in premium calculations.
  • Present the auditor with all Certificates of Insurance for covered subcontractors so you aren’t charged for them.
  • Classify all employees in the lower-rated payroll classifications if you aren’t sure about where they should be classified. However, you should never deliberately misclassify an employee.
  • Be sure you make the auditor aware of all employees who do only clerical work and are physically located away from the shop floor. These employees qualify to be classified in the lower rated clerical codes. If your clerical staff isn’t physically separate from the shop, you should consider changing their work location.

Contact our office for more information.

Content provided by Transformer Marketing.

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Scurich Insurance Services
Phone: (831) 661-5697
Fax: (831) 661-5741

Physical:
783 Rio Del Mar Blvd., Suite7,
Aptos, Ca 95003-4700

Mailing:
PO Box 1170
Watsonville, CA 95077-1170

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(831) 661-5697

Available 8:30am - 5:00pm