How to Save Money on Workers Compensation Insurance

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Except for a few states including Texas, most states require employers to have Workers Comp by law. Some states exempt businesses with less than 3 or 5 employees are from obtaining Workers Compensation. An insurance agent will be able to provide more detail on the specific guidelines of your state.

Workers Comp is regulated on a state-by-state basis, with the private insurance companies deciding the insurance premium. However, there are monopolistic states that require coverage from their Workers Comp state fund.

If you can provide supporting evidence that your business has a safety program or a low experience modifier score, some insurance companies provide premium discounts.

How Are Premiums Calculated?

The rating of workers compensation insurance starts with the classification rate assigned by the National Council on Compensation Insurance (NCCI).

For example, based on years of claim frequency statistics on Dry cleaners, NCCI sets a risk rate for the business class. Insurance companies use 700 different types of class codes. However, most businesses use only a few to classify each employee’s work type.

For businesses that are new to Workers’ compensation, insurance premiums vary depending on the types and percentage of class codes and the wages for each. For example, a business that has 15 out of 20 employees that work with heavy equipment has a higher risk rate compared to a business that has all 20 employees as clerical. The higher the risk exposure the higher the insurance premium.

According to Hartford, the basic premium= classification rate x (payroll/ $100) For example, a clerical class may be $0.20 whereas roofers who are exposed to higher risks may be $15 to $20.

Normally a business consists of employees with different roles. For example, a roofing company has roofers, accounting staff and sales staff. Correctly categorizing the class for each employee may be a great help to save insurance premiums for some businesses.

Premium Adjustments Based on Claim History

The premium for the first year of insurance is determined based on the average accident rate in the industry and the number of wages expected to be paid over the year.  After a year, the insurance company conducts an audit to ensure that you paid the right amount they insured over the past year. If you over paid, a refund will be issued. If the payroll is more than it was estimated, an additional premium may be charged.

After three years of continuous coverage, the insurance company may re-evaluate your premium based on your past claim history. The number of claims and the amount paid out by the insurance company is compared with the industry average. If it is lower than average, your premium will be lowered but in the opposite case, it will be increased.

 Safety Programs  

Businesses with expensive premium due to high-risk rates may be eligible for discounts if a safety program is in place at the workplace.

Having safety programs at the workplace reduces the possibility of an accident and even in the event of one, the preventive measures reduce claim payouts. This is both beneficial and favorable to both the insurance carrier and the business owner.

Some insurance companies provide onsite consultation to build a safety plan. There are also independent loss control consultants that provides service that trains managers and employees in order to meet industry safety guidelines.

Proving to insurance carriers that workplace safety training is in place may help in reducing your insurance expenses. Such examples could be, keeping records of drug tests, having safety committees, and educating employees on fraudulent claim prevention.

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UM/UIM COVERAGE

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Although auto insurance is mandatory, there are cases where you get into an accident with an uninsured driver. A coverage that can protect you from such situations is Uninsured Motorist Coverage (UM) and Underinsured Motorist Coverage (UIM). This coverage not only protects you from accidents where the other driver doesn’t have liability insurance but also when they have insufficient coverage to pay for your vehicle damages of bodily injury expenses.

Some consumers tend to consider Uninsured Motorist Coverage as unnecessary. However, UM/UIM coverage plays a very important role, and if there is no UM/UIM insurance, people have to go through the hassle of suing the other party to receive compensation for the loss caused by the accident. According to the IRC (Insurance Research Council) 13% of drivers in the U.S are uninsured, and the number isn’t declining.
The state with the highest rate of uninsured drivers is Mississippi (29.4%) followed by Michigan (25.5%), Tennessee (23.7%), New Mexico ( 21.8%) and Washington (21.7%).

 

What is more concerning, is that the accident probability and the amount of damage caused by uninsured drivers is higher than for insured drivers. The top reason for those that don’t have auto insurance is the cost.  However, it has been reported that 40 percent of the eight major accidents in the past decade have been caused by uninsured drivers. Due to this reason, liability coverage is legally required in most states, including Texas.

 

If you get in an accident with an uninsured or underinsured driver and are without UM/UIM coverage, you will have to pay a lot more for hospital bills or car repairs compared to the additional premium for purchasing the coverage. However, if you have the UM/UIM coverage, you can reduce financial expenses for accidents such as hit and run. You and your passengers will receive compensation for medical bills. UM/UIM coverage can also pay for lost wages if you can’t work because of the car accident. It is possible to sue the other driver even if you don’t have UM/UIM insurance, but if the other driver is incapable to provide compensation, you won’t be able to get enough or anything from the other person.

 

UM/UIM insurance is one of the coverages that are included in an auto insurance policy that is so-called full-cover car insurance.  Below are other coverages available in auto insurance that can be customized to the need of each insured.

Liability:

Covers the cost of the other driver’s injuries and property damage if you’re at fault in an auto accident.

Collision:

Coverage that can pay to repair your vehicle if it’s involved in an accident.

 

Other than Collision/ Comprehensive:

Coverage that protects against damage to your vehicle cause by non-collision accidents. For example, theft, fire, flood and vandalism.

 

PIP :

PIP ( Personal Injury Protection) covers medical expenses for you and your passenger if you’re injured in an accident.

 

Towing and Rental Reimbursement:

There are optional coverages such as “towing” and “rental reimbursement”. Rental reimbursement helps pay for your rental car costs while your car is being repaired due to a covered accident.

 

Q) What should you do if you get into an accident with an uninsured driver?

First, call the police to the scene of the accident.
Unless it is a major accident, the police may not come to the scene, but it is recommended that you report the accident.
Although it may be difficult to do so amid all the shock, having a police report can provide evidence when filing a claim. You should also contact your insurance agent if you need any assistance with filing a claim.

 

 

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Importance of Business Insurance

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The economy is gradually recovering from the pandemic, but there are still many business owners that are facing difficulties. This is due to the fact that other than sales; businesses are still exposed to various types of property and liability risks.

In fact, these risks can be more threatening than losses from poor sales. What may start from a small property damage or bodily injury accident may lead to lawsuits. Depending on the outcome, this can cause great financial hit to a business.

Major corporate companies separately hire risk management specialists to identify the risks in advance and come up with strategies to minimize the risks. However, the reality for small business owners is that they must juggle all the various roles from a chief executive to human resources.

Occupied with all the roles, it becomes difficult for you to identify and respond to underlying risks. The cost of purchasing insurance may also come as daunting.

Therefore, it is very important to mitigate the risk of accidents by obtaining business insurance. Below are answers to the most commonly asked questions.

 

Q) Shouldn’t insurance premiums go down when business is difficult due to the economic recession?

This is what most policyholders want. However, in reality, the more difficult the economy is, the higher the probability of accidents.  Therefore, insurance premiums tend increase when the economy is bad.

 

Q) Why must I have business insurance when business is already difficult?

If your business is already having financial difficulty, getting involved in an accident result in a bigger damage to your business.

Without any insurance you are taking needless risks on your own. Not having the proper coverage is also an issue.  Even if you receive compensation, it may be less than the actual amount of damage.

Therefore, it is recommended that you consult an agent and purchase a business insurance that can protect your business and your inventory (your property).

Another reason to have a business insurance in place is due to the fact that some states require insurance coverage, regardless of the size of the business.

A majority of commercial building or office building owners also require its tenants to maintain insurance through rental contracts.

 

Q) Does insurance coverage differ depending on the size of your business?

The essential coverages for small businesses owners are business property, General liability, and business income.

Business Owner’s Policy (BOP) is an insurance product that targets small business with the above coverages combined.

Each insurance company offers different coverage types depending on the business class. Therefore, it is important to check which coverages best suit your business.

If you run a big business, Business Package Policy (BPP) would be a better match. This product offers more customizable options by allowing you to add various coverages in addition to property and liability.

One important fact to note is that neither BOP nor BPP policies offer flood coverage. This is a type of coverage where a separate product must be purchased.

 

Q) What are the main factors that determine commercial building insurance?

One of the most important factors is the building’s exposure to fire hazards. Well-maintained buildings with fire preventive measures have a lower premium than those that are not.

For example, a building with explosive manufacturing will have a higher premium compared to a travel agency office.

There are many variables used to calculate the fire risk rate. Among them, building materials and construction types account for the largest portion.

Fire hazard ratings are determined through state-licensed inspectors.

They typically sign contracts with insurance companies to rate buildings’ structures. Below are five standardized rating systems that determine fire hazard ratings:

-Construction Materials

-Location

-Occupancy

– Fire Protection Measures

– Exposure

 

Q) How does claim histories affect insurance premiums?

Business insurance has a different premium rate system compared to auto insurance. In other words, the premium is not increased based on a predetermined formula like auto insurance.

Each insurance company has different guidelines but, frequent claims or large payout amounts may lead insurance premiums to increase. In some cases, an insurance company may decide to non-renew your policy.

 

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Renters Insurance

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Compared to the majority of homeowners having home insurance, only about 20% of renters have rental insurance. This leaves many renters exposed to sudden accidents without any protection. One of the main reasons is that many renters are unaware of what a renters insurance actually is. This article will go over the basics of what a renters insurance is and answer some commonly asked questions.

 

I’m renting a single-family home. Why do I need renters insurance when I don’t own the property?

Renters Insurance provides personal property and liability coverage. If you were to lose your belongings such as clothes, furniture or electronics in a fire, a renters insurance will help you cover the costs. Another case would be when you are responsible for someone’s injury while at your place. Liability coverage will help cover legal expenses and medical costs. In addition to these 2 main coverages, renters insurance provides more coverage options such as Loss of Use.

Why do apartment buildings require renter’s insurance?

Apartment complexes carry their own insurance. However, it only covers the structure of the building they own. It doesn’t provide coverage for your personal belongings or personal liability claims. If you accidentally damage the property that you are renting, the tenant is responsible to compensate for the loss. For example, if the stove that you left unattended results in a fire that damages the whole property, you will be the primary person to pay for the damages.

 

How is the price of renters insurance determined?

Renters insurance is one of the cheapest insurances that you can buy. This is because a renters policy doesn’t insure a physical property. In other words, it mainly covers your personal property and liability. Premiums are affected by location, year and construction type of the place you rent. In addition, the amount of coverage for personal property and liability coverage are also a factor.

What should I do if my property is damaged in a sudden accident?

First, contact your agent and explain the situation. If damage to the house or your personal property is large, it is important to take “emergency” measures to reduce additional damage. For example, if the window is damaged due to a storm, board it up as a temporary measure to reduce further damage. If an extensive repair is needed, contact your agent so that an adjuster can inspect the damage. If the damage is minor, you can consult a contractor to get an estimate on the repair before deciding to contact your insurance company.

 

What is Personal Liability Coverage for Renters Insurance?

Personal liability protects you when you are liable for someone’s injury or loss of personal property. It helps cover medical costs and legal expenses. If someone brings a claim or lawsuit against you, it is recommended that you consult with your insurance agent.

Can my insurance company cancel my policy?

Insurance companies normally do not cancel policies mid-term. However, if you fail to make payment, or purchased insurance based on false information, the company can cancel your policy. The guidelines may differ based on state, but most insurance companies notify you 30 days before expiration on renew or non-renew.

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Alcohol Related Accidents and Insurance

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Regards to drinking related accidents and insurance, there are two major kinds of policies. First, Liquor Liability Insurance for stores or restaurant owners who serve alcohol. Second, SR-22 filing in an auto insurance for those who have DUI.

According to statistics from the U.S. Department of Transportation, there are about 16,000 accidents involving drunk driving.
Despite the high number of deaths and property loss in alcohol related accidents, many restaurants and businesses that serve or sell alcohol still seem to be unaware of the need for Liquor Liability Insurance. A business owner in LA was sued for selling alcohol to a minor who ended up in an auto accident. The business owner was held responsible and was ordered to pay $1 million in compensation.

The “Dram Shop” states that bars and restaurants can be held accountable if they serve alcohol to a minor or visibly intoxicated customer who causes an accident and harms others. According to a recent report by the Texas Restaurant Association, only 135 restaurants, or 45% of the 300 restaurants surveyed, had Liquor Liability Insurance. Considering that the survey was based on large-scale restaurants affiliated with the Restaurant Association, it would be no surprise to find small restaurants that sell alcohol overlooking the risk of liquor liability.

Insurance is all about establishing a reliable foundation for your business by preparing for accidents before they happen. Even with new restaurants and liquor stores on the rise, many seem to be unfamiliar of the type of protection that liquor liability provides and underestimate the importance obtaining one.

Liquor Liability is a type of business insurance that provides coverage for business that sell, serve or distribute alcohol.  It can help cover third party bodily injury and property damage that an intoxicated person causes after you sold or served alcohol. Examples of such accidents are DUI and assault and battery.

Businesses that need Liquor Liability Insurance include liquor wholesalers, restaurants, bars, taverns, nightclubs, entertainment establishments, convenience stores, beer specialty stores, and wine specialty stores. For small businesses, Liquor Liability coverage is usually available as an endorsement that you can add on to your current business general liability and property insurance. As for large-scale restaurants and beer wine stores, a separate Liquor Liability insurance plan can be purchased.  Most Liquor Liability Insurance covers $300,000 to $2,000,000 per case.

Another insurance term associated with alcohol related accidents is SR-22. If you receive a ticket or have an accident due to drunk driving, you will be asked to file an SR-22 from the DMV or another institution. Also known as “Certificate of Financial Responsibility” an SR-22 proves that you have auto coverage that meets the minimum limits required by state law. This document cannot be issued by an insurance agency and can only be issued by insurance companies recognized by the state. In case the insured cancels or no renews their auto policy, the insurance company that filed the SR-22 must immediately report a SR-26 to the DMV. Which will then be followed with the suspension of your driver’s license or fines.

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Credit Scores and Insurance Rates

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Did you know that your credit score affects your auto and home insurance rates? Nearly all major auto and home insurance companies now review your credit score when providing quotes. Let’s take a closer look at how your credit information is used and how it affects your insurance premium.

What is a credit score?

A credit score is a snapshot of your creditworthiness represented as a number. Credit information provided by a credit reporting agency is converted into scores based on various criteria which ranges from 300 to 850. In general, the higher the score, the more financial credibility you have.

How are credit scores used?

Most insurance companies use credit scores in the following two ways. First, as a reference to determine whether to approve or decline a quote. Second, as to determine the amount of your insurance rate. When calculating the rate, some companies put more importance on credits scores whereas some also review driving records and claim history.

 

What affects your credit score?

Below are the most common factors that impact credit scores.

Negative factors: bankruptcy, collection, mortgage, debt exemption

History of late payments: Number and frequency of past due payments.

Debt to credit ratio: How much debt do you have compared to your available credit?

Length of credit history

Homeownership: Whether a house is owned or leased

Credit inquiries: The number of applications for new accounts, such as recent housing loans, utility accounts or credit card

The number of credit cards issued: the number of major and co-branded credit cards that have been approved

The type of credits you are using: credit cards from major companies, store credit cards, finance company loans, etc.

 

Check your credit history!

There is a high possibility that an insurance company will check your credit score. Which means checking your credit score for its accuracy is important.  You can visit companies such as Equifax (www.equifax.com), Experian(www.experian.com), or Trans Union (www.transunion.com) and request a copy of your credit history.

In addition, if you contact the Federal Trade Commission (www.ftc.gov ) you can gain access to a  consumer brochure on credit reports. If you think an incorrect credit report has negatively affected your insurance rate, the insurance company should give the name of the National Credit Bureau that provided your credit report. You can request a copy of the credit report for free and dispute incorrect information.

 

 

How to maintain and/or improve credit score

First, it is most important to pay the debt on time without being late. Credit scores and records should be checked regularly and any issues that may negatively impact credit scores, should be dealt with. Negative information can last up to 7 years on credit reports, so it is important to steadily raise scores. It will require some time but, one to two years of consistent management will make a difference.

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