Businesses of all sizes need workers compensation insurance to protect their employees if they are injured on the job. This type of insurance is required by law in most states, and it can be very expensive for businesses that don't have it.
Many factors determine the cost of workers comp premiums, and it can be difficult to understand all of them. This post discusses two important factors that influence workers compensation insurance premiums.
The Size of Your Business
Small businesses are usually classified as those with fewer than 500 employees, while larger businesses typically have more than 500 employees. In general, the larger the business, the higher the workers compensation insurance premiums will be.
Larger businesses tend to have more employees and more complex operations, which can increase the risk of workplace accidents and injuries. As a result, insurance companies charge higher premiums to cover the increased risk.
In some cases, however, small businesses might need to pay more for workers comp than larger businesses because they have fewer resources to spread the risk around. In other words, the small business has less of a cushion to absorb the cost of an accident.
Keep in mind that the size of your business is not always a good indicator of the risk. For example, a small company that operates in a high-risk industry (such as construction) might have to pay higher premiums than a large business that operates in a low-risk industry (such as retail).
Therefore, always consult with your workers compensation insurance agent to get a better idea of what to expect.
The Amount of Coverage You Purchase
In most states, businesses are required to carry a certain amount of workers comp coverage, but they can choose to purchase more if they want. For example, if your business has a high likelihood of workers getting injured, you might want to purchase more coverage to further protect your employees (and your business).
Not surprisingly, the more coverage you purchase, the higher your premiums will be. Insurance companies typically charge more for policies with higher coverage limits.
However, you need to make sure you have enough coverage to protect your business in case of a serious accident or injury. If you don't, you could be held responsible for expensive medical bills and other related costs.
Once again, consult with your workers compensation insurance agent to determine how much coverage you need. You'd be better off if you purchased more coverage than you need, rather than not enough. A company like Westralian Insurance has more information.