What is Workers Compensation Insurance?
On-the-job injuries and illnesses are a real risk that both employers and employees must prepare for. In addition to implementing and following safety protocols, most Massachusetts employers also need to carry workers compensation insurance.
Workers compensation insurance helps protect employees from injuries and illnesses they might sustain while working. The insurance won’t prevent an accident from happening, but it may help employees with medical bills and/or lost wages that result from a covered injury or illness.
What Businesses in Massachusetts Need Workers Comp?Massachusetts law requires most businesses that have employees to protect those employees with workers comp. Businesses normally need to have coverage for employees regardless of a person’s position, salary, tenure or hours, and not carrying any required level of coverage can result in fines or other consequences.
Should Businesses That Don’t Have Employees Carry Workers Comp?
In some cases, businesses that don’t have employees might still want to purchase a workers comp policy.
For example, workers comp may be advisable if an owner is actively involved in the business’ operations. Health insurance policies sometimes don’t cover injuries or illnesses that are sustained while working, which can leave a coverage gap. A workers compensation policy can sometimes be used to fill in such a gap.
Less often, certain businesses that have subcontractors regularly working for them might need to furnish those subcontractors with workers compensation coverage. Whether a business needs to do this is highly situationally dependent.
Business owners can find out if their business is under any obligation to furnish subcontractors coverage by talking with an insurance agent who specializes in workers compensation. Because these are uncommon and nuanced situations, it’s important to work with a knowledgeable agent.
What Factors Affect Workers Compensation Policies’ Premiums?
Insurance companies take into account a variety of factors when calculating workers compensation premiums. Some of the items they may consider include employees’ wages, employees’ vocations, a business’ industry and a business’ past claims history.
Since premiums are largely based on potential risk, rates tend to be less in situations where an on-the-job injury or illness is unlikely. Even when risk and rates are fairly high, though, having coverage is usually more affordable than facing fines and/or a potentially large claim without coverage in place.
Why Do Insurers Conduct Workers Compensation Audits?
Many insurance companies will conduct an audit when a workers compensation policy ends. The purpose of this audit is to make sure the proper premiums were paid for the policy.
When a policy is purchased, the amount paid by a business is usually an estimate of how much a policy will cost. The estimate is normally based on the information provided by the business buying the policy, but even the most detailed business can’t predict all the staffing changes that could take place in a year. People are hired, people are fired, and wages change. Any of these changes could impact how much should be paid for the coverage.
For this reason, an audit is frequently conducted after a policy terminates. Most audits involve little more than the insurance company reviewing the insured business’ books. After the review, any necessary adjustments to the premiums are made. The business may be sent a bill if premiums were underestimated, or the business might receive a refund if premiums were overestimated.