Workers Comp Insurance – Inside Tips for Cheaper Rates
August 13, 2009
Before you buy workers comp insurance or switch carriers there are a few things you need to know about how the workers comp insurance industry operates. Having worked in the industry for several years now I have found that many employers don't understand the system.
You probably already know that workers comp insurance is mandatory in your state. What you may not know is that all of the insurance companies have to abide by the same rules.
What does that mean?
Well each state has statutory minimums for coverage. Essentially, no matter which insurance company you buy insurance from they are all going to give you the same coverage. It's not like buying auto or health insurance where you can get higher deductibles or higher co-pays.
In simple terms, workers compensation insurance is calculated based off of your payroll, workers compensation classification codes, and your previous years losses. This is what ultimately will determine how much you pay.
So how can you get cheaper rates?
There's a couple of ways to get cheaper work comp rates. The first way is when you're actually buying the insurance from a broker. You should look for brokers that offer coverage from multiple carriers not just one. Many brokers are required to exclusively carry one company's insurance. What this means is that he won't be able to show you quotes from other companies as a comparison. When you talk to a broker the first thing you should ask is how many carriers does he have access to.
The next thing you need to know is that all of the big companies in your state, change insurance companies almost on a yearly basis. Typically what happens is that workers comp insurance companies offer a great introductory rate (think of credit cards) only to raise your rates each successive year. So if you're a big company it's in your best interest to keep changing carriers to continue to get the best rates.
Since workers compensation insurance coverage doesn't change the only way they can entice buyers is by offering cheaper rates up front. The insurance company's goal is to try and lock you in and start raising rates over time. Naturally they're not going to tell you this but it's a fairly common practice.
Recap on two of the ways to get cheaper workers comp insurance:
- Look for brokers that can offer quotes from multiple companies.
- Be ready to change insurance companies on a yearly basis.
For those of you who are already paying high work comp rates, I would recommend having your policy checked for errors. You may not realize this but workers comp insurance errors are a common problem in the industry. Brokers are usually to busy selling insurance to thoroughly look over your policy and make sure that everything is right.
If you want to know more about it then read: Workers Compensation Insurance Mistakes
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