5 coverages every Non-profit business should have.

The Non-profit Industry is a very wide industry that encompasses a large amount of different types of organizations. Some businesses simply operate a soup kitchen and only offer meals to those in need. Others offer medical coverage and still others offer construction services for those in need of housing. Each type of mission brings its own unique risks. That is why it is important for non-profit managers to partner with insurance agents who have knowledge in many different industries and agents who partner with a large amount of carriers. This can help the agent find the non-profit quotes from numerous carriers and will allow them to get your nonprofit more complete coverage and usually at lower rates on premium.

non-profit workers compensation insurance A lot of insurance carriers have restricted coverage for non-profit and charitable organizations due to a large amount of historical claims and their potential exposure from volunteers serving these organizations. A few carriers have taken a different approach to non-profits and created programs designed specifically to the unique needs of these businesses. Below is a list of six coverages most non-profits will need.

General Liability

General Liability Insurance covers you and your organization from damages done to third parties as a result of the actions of your organization. These can be bodily injury claims and property damage to anyone who is not you or your employee.

Workers’ Compensation

non-profit-workers-comp Workers’ comp differs from General Liability because it protects your business from being liable to injuries that occur to your employees. It is frequently referred to as the ‘Exclusive Remedy”. That is because it will pay for employee medical costs, disabilities, and lost wages related to on-the-job injuries and accidents. Your organization will benefit from this policy by having the security that you will not be sued by your employees for accidents that occur as a part of your normal operations.

Commercial Auto

Commercial auto insurance for your vehicles is an important aspect of any business insurance program. This coverage provides protection against physical damage and bodily injury resulting from car accidents involving you or your employees. Most coverages also provide some protection from theft and vandalism. Your organization does not have to own any vehicles to need some form of commercial auto coverage. For example, one of the most often overlooked business insurance coverage is Hired and Non-Owned Auto. Almost every business will occasionally utilize a personal, or non-owned vehicle for work related tasks. For example, your organization has an office staff member make trips to the bank to make a deposit of donations. Another example might be sending an employee to the restaurant to pick up food for volunteers. Every time someone uses a vehicle not owned by the non-profit to perform a business related function, the organization is at risk.

Cyber Liability

Most non-profit organizations think they are not at risk of a data breach. Many may think, I am a small organization with not much money, why would anyone bother to hack my organization. That is exactly what two small business owners thought when two of the largest data breaches in history occurred. Both the Home Depot and Target data breaches occurred by hackers first accessing a small business and then that small business had a vendor partnership with the larger business and that is how the hackers gained access. If you store any information about donors or have a partnership with another organization, you could be at risk of a breach. Most cyber insurance plans can be added to a (BOP) at minimal cost to your organization.

Commercial Property

business-property-valuation-for-commercial-insurance Commercial property is needed if you own property no matter the size of the premise. This will cover all property, including things like desks, chairs and anything physically attached to the building (i.e. shelvings, cabinets, etc.). Property coverage does not cover some specialized equipment like printers, computers or other office equipment. Coverage for this type of property would be covered under and Inland Marine Insurance Policy. These policies can easily be paired together under what is called a Business Owners Package (BOP). It is usually a good idea to ask your agent to quote a BOP because carriers are more likely to give your organization a discount on premium if you are carrying more than one coverage from them.

Owners and Officer’s

Owners and officer’s coverage might be the most important and frequently overlooked coverage for most non-profit organizations. The people who sit on your board are usually giving their time and expertise for free. Most just believe in you or believe in the mission of the organization. The last thing you want is for something to go wrong with your organization and them be liable for the actions of the organization.

liability-insurance-for-small-businesses Owners and Officers Coverage is for defense costs and damages (awards and settlements) arising out of wrongful act allegations and lawsuits brought against an organization’s board of directors and/or officers. Securing this coverage allows your officers to sit on your board and comfortably know they are not going to be liable for the actions of the organization.

Underwriting and What It Means to You

I have taken many calls from business owners in search of Work Comp. I would like to say that I have always been able to help. One common exception is when a business can only purchase coverage through the assigned risk pool and the truth is there are many businesses who have no other option. Assigned risk is outside the volunteer insurance market. Underwriting these industries is risky for the carrier and that makes it extremely difficult for an agent to find a carrier willing to quote the business.

Insurance agents typically interact with a minimum of 20 workers comp clients per day.

What ultimately puts a business into the assigned risk pool is what is called, underwriting guidelines. What can sometimes be a hurdle is explaining to potential clients that I am not the underwriter. I ultimately do not have the say on if a carrier will take on a particular business (risk). What makes a business a “risk”, whether it be a high risk or a low risk, is determined by the underwriter with the insurance carrier. There are many factors that determine if an insurance carrier will take on the risk of you and your business.

Insurance Underwriters research and assess the risk each prospect presents. Get all of your questions about underwriting answered at myinsurancequestion.com

Underwriters also research and assess the risk each prospect presents. This helps to create the market for securities by accurately pricing risk and setting fair premium rates that adequately cover the true cost of insuring policyholders. If a specific applicant’s risk is deemed to be too high, underwriters frequently refuse to cover it.

The most common reason a business is declined coverage on the open market is due to the business not having enough payroll for the exposure. Most construction businesses are going to need between $20 and $30k in payroll to be offered coverage by a carrier on the open market. Many of my potential clients ask me to just quote with $25k in payroll so they can get the policy they need. However, the policy will most likely be cancelled in a year due to not enough payroll or premium too small for risk.

The next reason for a business to be declined is because of 1099 or sub exposure. I should say that the amount of sub exposure to w2 employees makes a difference. Most carriers want no more than 20% of sub or 1099 employees. Just because a business has chosen to issue 1099 rather than W2’s does not automatically mean the employee is an independent contractor and should not have rights to work comp coverage. Many business owners assume that they do not have to provide coverage for the subs however if the sub or 1099 is not providing a Certificate of Insurance to the contractor or business owner, than the payroll will be picked up at audit. because of this the policy owner will owe in to the carrier for that employee. Ultimately what carriers worry about most with the subs is if there was a lapse of coverage the contractor would be on the hook for any claims that were to happen.

If I had to pick one other reason for a business to be declined coverage it is because of travel exposure. By travel exposure I mean using a vehicle to do work related to the business. Carriers deem this a larger risk because when the employees are driving there is a higher rate of claims and the claims tend to be more severe. It seems these days’ contractors need to go where the work is. If there is multi-state exposure where employees are traveling out of state or live near the border of two states, that is something that many carriers are not interested in writing. For instance, if a contractor sends 5 or 6 employees more than 50 miles away to do a job and they all ride together that is 5 or 6 claims that would have to be paid if they were all riding together and were injured in a car accident. Many employers think that while their employees are driving to work they are not covered under an employer’s work comp policy. That is accurate if you drive the same route to work every day and generally go to the same place every day. However, if you as a business owner send your employees on jobs that in tails driving exposure. The driving exposure is anything that would not normally be a part of everyday work. If the employee is solely driving for the reason of doing a job then the insurance carrier would indeed need to pay for the claims that arise out of a car accident.

Insurance is the most common example of underwriting that most people encounter. In order for insurance to work well, risk has to be spread out among as many people as possible. Underwriting helps insurance companies manage the risk that too many policyholders will file claims at once by spreading out the risk among outside investors. Once an underwriter has been found for a given policy, the capital the underwriter puts up at the time of investment acts as a guarantee that the claim can be paid. This allows the company to issue more insurance to other customers. In exchange for taking on this risk, the underwriter is entitled to payments drawn from the policyholder’s premiums.

Long story short the 3 reasons for businesses being declined by an underwriter are not enough payroll, too much 1099 or sub exposure and too much travel exposure. These risks are just a few that could result in your business being placed in the Assigned Risk Pool.

Workers’ Compensation Rates Could be on the Rise in Florida

Workers’ compensation insurance rates in Florida could be on the rise. As reported in outlets such as the Miami Herald, the Orlando Sentinel and the Insurance Journal. The National Council on Compensation Insurance (NCCI) filed for a 17.1 rate increase to take affect August 1st. The bulk of the recommended rate increase is due to an expectation that attorneys’ fees will increase the Florida workers comp landscape due to a recent Supreme Court Ruling.

The increased rates are unfortunate in that Florida workers comp insurance is already a significant expense to business owners. Furthermore, increased legal fees should not be a necessary expense to add to the system. Increased education, safety devices, adoption of return to work programs and decreased prescribing of opiates are all trends within the industry which are helping to control workers’ comp rates. Thus, while this appears to be a blow to work comp rates in the state, there are some trends that are working to reduce rates as well (which is a challenge given the ever increasing cost of medical care in the United States).

Another factor which drives Florida workers comp rates higher is the existence of fraud and other scams. Florida is one of the highest states in the country for fraudulent work comp claims, especially in the Miami area. Additionally, as demonstrated in this article from the Insurance Journal, scams to artificially reduce workers’ comp premium are prevalent in Florida. Scams and fraud unfairly increase work comp rates for business owners that are trying to work within the system.

Florida is what is known as a rate mandated state for workers’ compensation insurance. Wisconsin and several other states are set up like this as well. This means workers’ comp rates are set by the state. Work comp rates vary by employee classification and experience modifications, but they are otherwise set by the state. This is in contrast with most states where insurance carriers file rates and there is different pricing between carriers. Florida’s workers’ compensation rates are just below average compared to other rates in the most recently published national study.

Given Florida is a rate mandated state, business owners may wonder what they can do to reduce workers’ compensation rates. In Florida, a small number of carriers, such as Employers, have file with the state of Florida to offer a 5% discount from the rates set by the state of Florida. On the other hand, there is a consent to rate, which can be offered by certain carriers in Florida for difficult to quote businesses. This means a carrier offers workers comp insurance, but they are allowed to charge up to 25% more than the rates set by the state of Florida if an insured signs off on this pricing. If rates can’t be improved, business owners may have better payment options available such as pay as you go insurance. Furthermore, better safety practices leading to lower claims (and thus a lower experience modification factor) are always a way business owners can decrease their work comp insurance costs. Most within the industry believe the Florida legislature will make sweeping changes to the workers compensation system at some point in 2017 or 2018. So business owners can rest assured that in some way, help is on the way in Florida.

6 coverages every Lawn Care or Landscaping business should carry.

Lawn Care and Landscaping is a diverse industry and with that diversity comes a lot of risk. How you go about protecting your business from those risks can make all the difference in the long term success of your business. Some landscaping businesses simply mow lawns, others lay sod and plants shrubs, some even climb several feet into the air to work on trees and others grow and sell plants at one central location. No matter what type of landscaping business you are running, here are 6 coverages that every business in this industry should carry.

General Liability
Workers’ Compensation
Commercial Auto or Hired and Non-owned Auto
Inland Marine
Commercial Property
Business Owners Package

General Liability

General Liability Insurance is a policy that most every business needs. Depending upon the state and industry you operate in, it is required by law to be in business. For the lawncare and landscaping industry this coverage can prevent your business from damage that is caused to third parties by you or your employees. This can apply regardless of whether the incident occurs on your property or at the property of the customer.

Workers’ Compensation

In 48 out of 50 states workers comp is required by law. What you pay in premium will depend on your experience modification rating and the NCCI class code for your business. Lawn care and Landscaping is an industry that has several classification codes which include: 9102, 0042, 9182, 0106, 9220, and 9016.

Commercial Auto or Hired and Non-owned Auto

Commercial Auto and Hired and Non-owned Auto Insurance are two coverages that deal with vehicles being used for business purposes. Which of these two coverages your business needs is determined by whether or not the business owns the vehicle that is being used for daily work. If you have employees using their own vehicle as a part of their job than you need Hired and Non-owned Auto Coverage. If you are leasing the vehicle for the season, than this is the coverage you need as well. If your business owns the vehicle than you need commercial auto insurance.

Inland Marine

Inland Marine Insurance Coverage is also known as equipment coverage or floaters coverage. These terms are used because this insurance is for equipment not covered by your property or auto insurance policies and it is usually equipment that is going to be in transit. If you have a trailer with several pieces of equipment that is going to be transported to several locations throughout the day than you need this type of coverage. This could also be necessary for greenhouses if they are having plants delivered to a clients location. while the products are being transported they would be covered by this policy.

Commercial Property

If you own property, no matter how big or small than you need this coverage. Without it you can put at risk everything that makes your business run. Unless you can afford to replace the property and everything inside it than you need this coverage. This policy can usually be added to BOP for minimal cost to the business.

Business Owners Package

Most insurance carriers have what are called Business Owners Packages designed for each industry and each classification code. Through their experience with claims in each industry, each carrier has a basic recommended package of coverage they deem appropriate for each business. These packages can be adjusted based on the industry you are in and the amount of risk you as a business owner are comfortable taking. This is where the advice of an experienced insurance agent who you trust can be very valuable. An experienced agent should be able to lay down the risks and rewards of each coverage and help you to make the most informed decision possible when buying insurance for your business.

SIC Business Insurance Codes:

• 0781- Landscaping and Planning

• 0782- Lawn and Garden Services

NAICS Liability Classifications:

• 541320- Landscaper Architectural Services

• 561730- Landscape Services

Business ISO General Liability:

• Code: 97047- Landscape Gardening

• Code: 97050- Lawn Care Services

Common Workers Compensation Class Codes:

• 0042- Landscapers and Drivers

• 9102- Park Maintenance, Lawn Care, and Drivers

• 0106- Tree Pruning or Spraying

Carriers Appetites

Carriers Appetites change dramatically from year to year. This goes mostly for different industries, but it can also apply to different coverages as well. For business owners looking for coverage this can be a frustrating and puzzling part of their insurance experience. They are simply trying to obtain proper coverage for their business. Depending on many things external to the business, carriers may change how much they desire certain coverages and industries. The prices businesses pay for coverage changes accordingly. The main way to navigate this issue is to partner with an agent you trust and an agent who works with many different carriers.

My-Insurance-Question-Carriers_Appetites

When carriers change their appetite for your industry or the coverage you need, it is because they are looking for their ideal client. Carriers want to make it as appealing as possible for those clients to purchase coverage from them and they want to make it less appealing for clients they deem a higher risk. Industries with high risk tend to pay more and struggle to find coverage while industries that carriers have a stronger appetite for are typically ones that have high premium and tend to have a low rate of claims.

In most cases, carriers are willing to be more aggressive with credits and discounts when your business is in one of these low risk industries.

If you are in a high risk industry don’t worry. There are some things you can do to combat the lack of appetite carriers may have for covering your business. First and foremost, you should find an insurance agent who partners with many different carriers and not one or a select few. This way they can shop around to find a carrier who does have an appetite for your industry. If your agent partners with one carrier or a select few, they may not be able to find the carrier who has an appetite for your industry. There are a lot of carriers who like to find a niche where they can offer to one industry and do it well. Because of this, these niche carriers may have an appetite for your industry where a major carrier will steer clear of those risky industries.

This is common in trucking and construction industries. These industries typically are a higher risk. Any business that has employees driving tend to have more claims and the claims tend to be higher cost. Because of this, some carriers specialize in these industries because they believe they can offer expertise in this niche industry where a larger carrier just does not have the time or the desire to take a risk on covering these businesses. This may be true of certain coverages too. For example, flood insurance is a coverage that is only needed in certain parts of the country. When their is a flood in an area there are typically a lot of claims within a short period of time. Some carriers jump out of the market for a few years when this occurs. Some carriers jump in, in an attempt to capitalize on these areas.

The most important thing any small business owner can do to insure their business properly is to partner with an independent agent who partners with as many carriers as possible. This will allow them to shop around for you in an attempt to find those carriers who do have an appetite for your industry. Any time you see a spike in premium you should speak with your agent about other carriers who may offer more aggressive credits or discounts. If the agent partners with many carriers they should have good knowledge of which carriers do have an appetite for your industry and they are able to leverage that to get your business better coverage and the lowest rates possible.

Workers Compensation Insurance Expert

Personally, I have written workers compensation insurance across the U.S. for 10 years. I have partnered with multiple industries and multiple insurance providers. While doing this I have realized the difficulty and importance of finding an insurance agent that specializes in this line of insurance. Especially finding an expert who has a positive relationship with the underwriters they work with. For most business owners, Workers Compensation Insurance is one of their biggest insurance expenses. It can be a nightmare to find if the business experiences’ a substantial change in payroll, or if the business has claims or a bad audit experience. Most insurance agents do not specialize in workers compensation insurance and because this they do not fully understand how it operates. Therefore, these agents do not want to jeopardize their relationship with their client and potentially lose the other lines of insurance such as general liability or auto by giving bad advice.

While speaking with business owners about workers compensation insurance I feel it’s important to explain the process of how the policy works. I attempt to explain what a classification code is, what the rate per $100 means and how uninsured and insured 1099’s are handled by the audit process. I do this in an attempt to help the business owner understand how the policy can change throughout the policy term. After the audit is completed, most workers compensation policies change in total pricing after the policy period expires. Since the policy is audited following each policy term it’s important for the business owner to understand the potential changes that could have a significant financial impact on their pocketbook. Do you want to work with an agent that doesn’t take the time to explain these potential changes to you?

When working with a workers compensation expert, the agent will be able to determine or research the correct workers compensation classification code. The correct workers compensation code determines the businesses pricing for workers comp insurance, it’s the most important first step in the process. After the classification code is determined the agent should explain the importance of estimating your employee wages correctly at the beginning of the policy due to the audit. If a business uses 1099 labor, it’s important for the agent to explain how that 1099 is either added or excluded from the business owners audit. After the policy period expires and the audit takes place, it’s important for the agency to be able to explain why the audit resulted in the way it did OR be able to help with disputing the audit. Business owners can typically accomplish this with the insurance company directly, however, I feel it’s important for your insurance agent to be able to review, educate and assist with correcting after an audit is finished.

One component that most business owners do not understand about insurance quotes is the relationship between the agent and the insurance company is very important. If the agents relationship with the insurance company is untrustworthy, it could cause the insurance underwriter to decline instead of quoting because they don’t trust the information given by the agent. If the agent doesn’t specialize in workers compensation insurance, it’s possible the agent is not providing the relevant information to the underwriter. It’s important to make the underwriter feel comfortable with the business they are reviewing before they are willing to quote, especially when it’s a more difficult or unfamiliar industry. Loss ratio of the clients that agent has insured with an insurance provider is extremely important. If an agency continues to insure bad businesses with an insurance company, suffering bad losses or them finding dishonest information at audit, that insurance underwriter will be less likely to quote for that agent and will not be as aggressive with pricing.

Work with an expert when trying to find optimal pricing for workers compensation insurance. Not only will an expert know how to explain and assist but they will have the relationships established with insurance providers that will give you the most competitive pricing.

Should I Buy Workers Comp Insurance Online?

Should you buy workers comp insurance online?

Over the last 10 years or so, more and more insurance providers are starting to show up online. Additionally, even many traditional brick and mortar agencies are at least starting to have a website presence. There are many things to look for in a commercial insurance agent. Among the things that first come to mind are adequately protecting your business from risk of loss, providing well-priced insurance and providing good customer service/being available for customers. Online based insurance providers often perform well at many of the things that are important to insurance buyers, but do they provide the same service?

Online insurance providers are typically high volume agencies. That can benefit customers in a number of ways. First, many of these online providers have access to many different insurance carriers which can allow substantial price shopping. Additionally, due to having a high volume, these online providers generally have good relationships with numerous insurance carriers. Those relationships can often be leveraged to benefit clients when appropriate. Furthermore, due to volume, the online providers often have substantial experience and expertise in the coverages they are offering.

Another advantage of online insurance providers is that they tend to be consistently available during business hours. It is often the case that traditional agencies may be more involved in your community and you may not meet your online provider face to face. However, due to their business model, online providers are typically available in their office during most business hours, which generally allows customer needs to be met promptly. Additionally, online providers are typically licensed in all states, so they are generally set-up to help if out of state insurance needs arise.

With workers’ comp insurance, most of the benefits are determined by statute/laws in particular states. Thus, if a reputable carrier is used and information and business information is fully disclosed, most business owners should be able to be confident that their business is adequately protected by the insurance they purchase. With other lines of insurance, like general liability and professional liability, it is possibly more important to establish a level of trust with your insurance provider. It is important to make sure your business information is reviewed, so that coverage gaps can be analyzed to make sure your business is protected. Establishing this level of trust can often be done over the phone as well as it can be done in person.

Another thing to consider is that online insurance providers may be more closely aligned with the direction of the insurance industry. Many insurance carriers are continuing to develop more and more technology. Online insurance providers are generally also tech savvy. They focus on technology development and utilization. Online agencies may be better able to pass on carrier technology to their clients, while also providing their own technology to clients. All of this is designed to make issues related to business insurance more efficient for you the business owner.

There are numerous reasons it may be beneficial to consider buying workers’ comp and other business insurance online. Prices are often very competitive. Online providers are generally available for customers and generally have substantial expertise in the insurance products they provide. Additionally, online providers are typically among the most tech savvy agencies in the industry, which is in line with marketplace trends and benefits customers. There are many things to consider in choosing an insurance provider, but online providers stack up well in many factors which are typically considered.

Construction Industry

Why is Workers Compensation Insurance so difficult to purchase?

The construction industry in general is very difficult to locate multiple options when quoting workers compensation insurance. A large majority of workers compensation providers do not have an appetite for small construction or high hazard construction businesses. These insurance companies feel the construction industry suffers too frequent and severe claims. Therefore, a lot of construction businesses default to the appropriate state fund or assigned risk pool for workers compensation coverage. The state fund or assigned risk is the most expensive option with the least flexible payment plan. It is simply not the best option. The state fund, also known as the pool or assigned risk, often becomes the only option for small businesses with a high risk and a low amount of revenue. When businesses travel into other states to perform work, there are additional difficulties if they are insured through a state workers compensation fund. In most cases this creates a gap in coverage when the employees are working out of state. Several state workers compensation funds do not extend coverage outside of that state. It’s best for business owners to contact their agent or the insurance provider to verify if coverage extends to the job site that is outside of the state boundaries.

Factors that cause difficulty for the construction industry to find workers compensation insurance quotes:

General Construction Services – not specializing in 1 or 2 specific trades. When a business does the same trade everyday the chances of a workers compensation claim is less likely. Construction businesses that perform multiple trades are more difficult to find multiple workers compensation solutions for.

Heights – historically workers compensation claims pay out considerably more when an employee falls from a height above 15 feet. Most workers compensation insurance carriers limit heights to 15 feet. Any heights slightly above 15 feet must show proper safety precautions taken. Business owners that require proper safety equipment to be attached and written procedures in-place for the underwriter to review generally are given more competitive options. It’s important for your insurance agent to give the proper information to the insurance company underwriter so they have a clear and comfortable picture. Most insurance agents do not take the time to gather the right information therefore the underwriter doesn’t feel comfortable and declines to offer coverage.

Unstable Industry – when the U.S. economy fell in mid-2000’s, the construction industry suffered the most. Workers Compensation insurance carriers who insure construction businesses suffered claims combined with reduced premiums paid by employers due to fewer employees. Insurance companies must be able to somewhat predict the amount of money they are collecting for each risk they insure. Businesses that produce a consistent payroll are easier to predict, businesses that process payroll randomly throughout the year are not, therefore less likely to have multiple insurance companies willing to quote.

Sub-contractors or 1099’s – construction businesses commonly use 1099 or sub-contract labor. Businesses do not specialize in some construction services that are connected to a job therefore must sub-contract to another business that does specialize in that service. The use of 1099 sub-contractors in this way is acceptable by most insurance providers as long as the business owner is collecting a workers compensation certificate of insurance from the sub-contractor. Businesses that choose to pay their labor by 1099 instead of w-4 are viewed negatively by workers compensation providers. Most workers compensation providers have a very limited appetite for businesses that use a significant amount of 1099 labor. If a sub-contractor fails to pay their workers compensation premiums and the General Contractor is not aware their policy cancelled, most likely the General Contractor’s workers compensation policy will be required to cover the claim. Therefore, Workers Compensation providers do NOT like a large sub-contractor or 1099 exposure even if certificates of insurance are collected.

How to properly prepare for a Pay as You Go Workers Compensation Audit

Pay as you Go Workers Compensation Audit

Get the best information about a Pay as You Go Workers Compensation Audit at MyInsuranceQuestion.com

Workers Compensation Insurance policies require an annual payroll audit to be completed. The purpose of the audit is to verify payrolls for the policy period, confirm operations (class codes) and to check for 1099 sub-contract labor. 1099 sub-contract labor can be added to your audit if they are uninsured. In order to exclude a 1099 from your workers compensation audit, they must meet the standards for an independent contractor and must provide a valid workers compensation certificate or state approved exemption. The workers compensation auditor will typically contact you by mail or phone to set-up a time to gather the necessary payroll related documents. There is typically a small period of time to complete the audit otherwise it’s submitted as non-productive. When the audit is non-productive the insurance company produces an “estimated audit” that increases payrolls over the original estimate and a notice of cancellation. The business owner then has to “reopen” the audit and complete within the time frame determined by the cancellation date. If the audit remains non-productive and the policy cancels, the insurance company then reports to the workers compensation bureau. Due to the unproductive audit the workers compensation bureau can prevent coverage from being purchased for that business until the audit is completed.

Typical payroll documents that are provided to the auditor includes the 941’s or Quarterly Tax Reports for the nearest 4 quarters of your policy period. Most policy periods do not work perfectly with the start of a new quarter, therefore, auditors collect the closest quarterly tax reports and commonly use a Payroll Summary for the exact time period to verify payrolls. Most auditors are not familiar with the Pay as you Go model, therefore they audit using the traditional method only, using the Quarterly Tax Reports. The use of the payroll summary for the exact time period is VERY IMPORTANT for the Pay as you Go billing option. Since the business owner is paying premiums based on actual payrolls it’s important to provide the payroll summary for the exact time period. It’s important for the business owner to communicate the need to use the payroll summary for the exact time period at time of audit. After the audit is completed the insurance company will generate a document that shows the payrolls used to complete the audit. If those payroll figures do not match to your payroll summary report either contact your agent for assistance to dispute OR the insurance company. Explain that your billing is Pay as you Go and the auditor’s results do not match your payroll summary.

In addition to payrolls, the auditor is confirming the employees classification is correct. For most businesses all employees belong in 1 of 3 classification codes. Each industry has a workers compensation code that is assigned. Some employees belong to a classification code that is not included in the main code OR their hazard is minimal, therefore classified separately. If an employee is performing job duties that belong in multiple workers compensation codes, typically those wages are either classified to the highest rated exposure or divided between multiple exposures. In order to separate payrolls, the business owner has to provide the auditor with verification of the hours worked in each code per employee. The two best methods for accomplishing this is a payroll system that documents the job description and the hours worked for each employee. Otherwise the business owner will need to use a Log Book to document the jobs and hours worked for each employee to properly separate. The clerical workers compensation code is one of the few codes that cannot be separated with another job duty. Clerical is 100% or nothing.

6 Questions to consider when purchasing Commercial Insurance.

What is the difference between Workers’ Compensation and Employers Liability Insurance when it comes to a commercial insurance policy?

First and foremost, Workers Comp is the one commercial insurance policy that is required by law in most states. Workers comp covers injuries that happen to your employees that occur as a part of the normal business operations. It pays for medical costs and some lost wages. Typically, 60 percent of the wages are paid depending on the particular plan. Employers liability is a part within a work comp plan that that deals with most types of liability that are not associated with lost wages or medical costs. Most commonly this is the cost of a lawsuit. If you have an employee who is hurt on the job and they sue on top of their workers’ comp coverage for damage caused by you or your business these costs can be covered by an employer’s liability portion of a workers’ compensation insurance policy.

What is one type of insurance that many business owners turn down that they frequently regret when claims occur?

Business loss of income coverage is one that many fail to see the value of unfortunately until it is too late. The most basic example of the need for this coverage is when a fire occurs. The general liability or commercial property policy will cover the cost to rebuild your premise, but they will not pay for lost revenue and employee wages while your business is closed to rebuild. If a business cannot withstand several weeks or a few months without revenue this frequently is when they are forced to close altogether. Fortunately, this coverage is usually a part of a business owners package. When businesses by the package they usually are fully insured for these types of losses.

How does a well-documented safety program effect what I pay for a commercial insurance policy?

The main way safety programs can help is when you are asking for credits or discounts and when you are challenging your experience modifier after a claim. If you have had a claim and you have a well-documented safety program in place your agent can use this as evidence that the occurrence was an outlier and not a sign of more incidents to come.

How does my businesses claims history effect what I pay for Workers’ Compensation Insurance?

Your claims history is part of the formula insurance carriers use to come up with your experience modification rating. This rating determines how much of a risk your business is to insure and it is the main factor carriers take in to account when they are deciding to insure your business or not, as well as how much to charge your business in premium. This and the businesses workers comp codes are the main controllable factors insurance carriers use to determine premium rates.

When should I consider going with Pay as You Go Workers’ Compensation?

Seasonal or cash flow strapped companies benefit best from a Pay as You Go Program. This program allows you to pay a small portion of the premium up front and then the rest is due in monthly installments based on your monthly payroll. It helps to free up cash on the front end of the policy period and it prevents excessive audits on the back end of the policy period.

Where can I go to get help when a claim occurs on my businesses commercial insurance policy?

Actually your carrier is the best person to contact with a claim, but it is always a good idea to keep your agent in the loop as well. Your carrier is set up to handle and process the claim. Ask them for help with a return to work program if you do not already have one in place. Studies show the sooner the worker gets back to work in any capacity the more likely they are to return to work and the claim does not get out of control. Keeping your agent in the loop is great as well because they can go to bat for you in the event the carrier is not satisfying you or your employees needs during the claims process.