Tag Archive for: workers comp

Does My Business Need Workers’ Compensation Coverage?

/in

If you are a business owner, then you likely have a lot of questions about Workers’ Compensation Coverage. What is it? Do I need it? What does it cover? Where do I get it? 

In this article, we’ll answer all these questions and more. Let’s dive in.

What is Workers’ Compensation Insurance?

Workers’ compensation is built on an exchange between employers and employees. In the case of a work-related injury or illness, employees are entitled to effective medical treatment coverage while in return, employers are protected from legal action resulting from those injuries.

According to the California Employment Development Department, “Workers’ compensation provides benefits for workers when their injury or illness arises out of or is caused by their work. Workers’ compensation may also pay medical bills and benefits for temporary or permanent disabilities.”

Does My Business Need Workers’ Comp Insurance?

Under California Labor Code Section 3700, if a business employs one or more employees, the business must provide workers’ compensation coverage for each of those employees. However, if you are the sole proprietor of your company, you do not need to purchase workers’ comp insurance.

Why Does My Business Need Workers’ Compensation Insurance?

A workers’ compensation insurance policy provides:

  • Coverage for the costs of medical treatment, and
  • Lost time or indemnity benefits

Workers’ compensation is built on an exchange between employers and employees. In the case of a work-related injury or illness, employees are entitled to effective medical treatment coverage while in return, employers are protected from legal action resulting from those injuries.

Through workers’ comp, both parties are protected, which reduces conflicts when accidents occur in the workplace. 

In California, it is a criminal offense for business owners to fail to have workers’ compensation insurance if they employ one employee or more.

Do I Need Workers Comp for Part-time or Seasonal  Employees in California?

If a business employs one or more employees on a temporary or permanent basis, they are required to purchase workers’ comp insurance. The rule is the same for part-time and full-time employees or any employees that are related to the business owner. 

Do Members of an LLC Need Workers Comp in California?

If your business is a sole proprietorship, single-member LLC, or partnership, and you don’t have employees, California law usually doesn’t require you to have a workers’ comp policy.

Can a Business Owner Purchase Workers’ Comp For Themselves?

Sometimes a business owner or sole proprietor may choose to purchase workers’ compensation insurance to cover themselves only. This is possible. However, the inclusion of a sole proprietor must be clearly stated in the workers’ compensation policy or must be added as a coverage endorsement to the policy. 

Do 1099 Workers Need Workers’ Comp in California?

No, you don’t have to cover independent contractors under your workers’ compensation policy. Why? They’re not technically considered employees of your business.

However, if you transition any 1099 independent contractors to W-2 employees, you will need to purchase workers’ compensation for them.

Can Business Owners Be Fined For Not Providing Workers’ Compensation?

Business owners can face  several consequences for not complying with the law, including penalties and fines.

According to the Department of Industrial Relations (DIR), “if the Division of Labor Standards Enforcement… determines an employer is operating without workers’ compensation coverage, a stop order will be issued…. and failure to observe it is a misdemeanor punishable by imprisonment in the county jail for up to 60 days, or by a fine of up to $10,000, or both.”

Where Do I Get Workers’ Compensation Insurance?

Employers must purchase workers’ compensation insurance from either a licensed insurance company or through the State Compensation Insurance Fund (State Fund). Employers may also have the option to self-insure for workers’ compensation.

Where to Find Workers’ Compensation Coverage in San Diego

At Apex Risk & Insurance Services, we use The Apex Proven Process to learn about your business, strategize to assemble the right program for you, and use our deep industry and market knowledge to leverage the best pricing and coverage. 

This leaves small business owners with more time to do what they do best: Run their business knowing that their company and employees are protected.Check out our commercial insurance policies, then, read on to check out our full guide to workers’ comp for small businesses.

Small Businesses: Your Guide to Workers’ Compensation

/in

Adopted in most U.S. states nearly a century ago, workers’ compensation insurance is the oldest American social insurance program. Since then, workers’ comp has become required in nearly all states as soon as a company hires its first employee.

In this guide for small businesses, we’ll review all the information that small business owners need to know to get started with workers’ compensation insurance.

Let’s dive in.

What is Workers’ Compensation Insurance?

Workers’ compensation is built on an exchange between employers and employees. In the case of a work-related injury or illness, employees are entitled to effective medical treatment coverage while in return, employers are protected from legal action resulting from those injuries.

Through this arrangement, both parties are protected and reduce conflicts when accidents occur in the workplace.

What Coverage Does Workers’ Compensation Provide?

A workers’ compensation insurance policy provides:

  • Coverage for the costs of medical treatment, and
  • Lost time or indemnity benefits

Let’s take a look at each of these in detail.

Coverage for the Costs of Medical Treatment

In the event of an accident at the workplace, workers’ comp insurance covers the cost of immediate medical care. These costs may include:

  • An ambulance ride
  • Emergency room visit
  • An appointment with a physician
  • Prescription medications
  • Surgeries
  • Hospital stays, and
  • Other medical costs

For example: A retail employee is stocking shelves at their workplace using a ladder. They slip, fall, and break their arm. Workers’ comp will pay for the ambulance ride to the hospital as well as any necessary surgery, medications, and physical therapy.

Lost Time or Indemnity Benefits

After experiencing an incident in their workplace, an employee may be unable to return to work for some time. Lost time and indemnity benefits pay part of these lost wages while the employee recovers from the injury or illness.

How are these benefits calculated? According to the Workers’ Compensation Insurance Rating Bureau of California® (WCIRB), “indemnity benefits are calculated on the basis of an injured worker’s weekly wage and determined pursuant to applicable California laws.”

For instance: An employee working in a manufacturing plant drops a piece of equipment onto their foot and breaks several bones. This employee must stay off their feet for six weeks to recover before returning to work. Workers’ comp will provide lost wages for this employee during recovery.

What You Need to Know About No-Fault Laws

In California, workers’ compensation laws are no-fault laws. No-fault compensation is based on the concept that injured employees are entitled to compensation without having to prove fault against the other party. 

What does this mean for business owners? It doesn’t matter who is at fault for the incident. You do not have to admit guilt in the incident and the employee doesn’t need to start a lawsuit against you. Instead, employees need only prove that the injury arose from the “course and scope” of their employment.

These laws were designed to reduce the number of lawsuits against employers as well as make the process of an employee receiving compensation more efficient. 

Exceptions to the No-Fault System

There are a few exceptions to the no-fault system that small business owners should be familiar with. These include:

  • Intoxication: If injuries were primarily caused by the use of drugs or alcohol
  • Intentional Infliction: If an employee purposefully caused their injuries
  • Fighting: If a fight between staff members or with a customer causes injuries, except for self-defense
  • Horseplay: If employees are messing around at work and cause an injury unrelated to their responsibilities

What Businesses Need Workers Compensation Insurance?

Under California Labor Code Section 3700, if a business employs one or more employees, the business must provide workers’ compensation coverage for each of those employees. However, if you are the sole proprietor of your company, you do not need to purchase workers’ comp insurance.

In California, it is a criminal offense for business owners to fail to have workers’ compensation insurance if they employ one employee or more.

Do Businesses With Temporary or Part-Time Employees Need Workers’ Compensation Insurance?

The short answer, yes. In California, if a business employs one or more employees on a temporary or permanent basis, they are required to purchase workers’ comp insurance. The rule is the same for part-time and full-time employees. 

For example: An accountant who owns their own firm decides to hire an employee during tax season to work 20 hours a week to help with additional administrative work. Even though this position is temporary and part-time, the business owner must provide workers’ compensation benefits.

Can Small Business Owners Be Fined For Not Providing Workers’ Compensation?

Business owners can face an array of consequences for not complying with the law. 

According to the Department of Industrial Relations (DIR), “if the Division of Labor Standards Enforcement… determines an employer is operating without workers’ compensation coverage, a stop order will be issued…. and failure to observe it is a misdemeanor punishable by imprisonment in the county jail for up to 60 days, or by a fine of up to $10,000, or both.”

What Factors Affect How Much Workers’ Comp Will Cost for Small Businesses?

California does not regulate premiums for workers’ comp insurance. This means that rates will vary amongst insurance carriers. Typically, premiums are determined by a set of factors, such as:

  • Industry classification
  • Special underwriting adjustments
  • Group or dividend programs, and
  • Employer history/experience modification

Read on to learn why workers’ compensation insurance rates are rising.

Looking to Purchase Workers’ Comp Insurance?

Small business owners already have a lot on their plates. They shouldn’t also have to worry about purchasing the correct workers’ compensation insurance too.

At Apex Risk & Insurance Services, we use The Apex Proven Process to learn about your business, strategize to assemble the right program for you, and use our deep industry and market knowledge to leverage the best pricing and coverage. 

This leaves small business owners with more time to do what they do best: Run their business knowing that their company and employees are protected.
Check out our commercial insurance policies, then, read on to learn how to protect your business from cyberattacks.

Why are Workers’ Compensation Rates Rising?

/in

Employers in California are required to purchase workers’ compensation to protect against work-related injuries and illnesses.

The cost of workers’ comp, however, has been steadily rising for the past few years, and with the most recent Pure Premium Rate Filing from the Workers’ Compensation Insurance Rating Bureau of California® (WCIRB), there’s no sign of slowing.

But why are these rates rising in the first place?

Changes in the workforce, medical inflation, and wage inflation have all played a part. Read on to learn what rising workers’ compensation rates mean for California employers.

What is the WCIRB?

First, what is the WCIRB?

The WCIRB or Workers’ Compensation Insurance Rating Bureau of California is “California’s trusted, objective provider of actuarially-based information and research, advisory pure premium rates, and educational services integral to a healthy workers’ compensation system.”

The WCIRB’s Pure Premium Rate Filing

In July of 2022, the WCIRB submitted its September 1, 2022, Pure Premium Rate Filing to the California Department of Insurance (CDI).

In this filing, the WCIRB proposed a set of increased premium rates. On average, these rates are 7.6% higher than those approved the year prior on September 1, 2021.

According to the WCIRB, the average of the proposed September 1, 2022, advisory pure premium rates is $1.56 per $100 of payroll.

Read on for the WCIRB filing.

Understanding Why Workers Comp Rates Are Rising

The California Department of Insurance (CDI) regulates workers’ compensation insurance rates in California. The CDI is influenced by advice from the WCIRB.

The WCIRB makes recommendations, in part, based on the state’s “loss ratio.”

What is the Loss Ratio?

In simple terms, a loss ratio is “the percent of the money paid out in claims relative to the money earned from employer premium payments.”

If the workers’ compensation claims exceed the amount paid in premiums by employers, the state’s department of insurance will advise or recommend that carriers raise rates.

The CDI does this to allow profitability for the carrier.

How Does This Loss Ratio Affect California Employers?

California employers will experience higher rates due to the increase in workers’ compensation claims.

Why Are There More Workers’ Compensation Claims?

According to experts, reasons there may be an increase in workers’ compensation claims include:

  • Changes in the workforce
  • The increasing average age of the workforce
  • Medical inflation spurred in part by expensive medical technology
  • Rising wages, and
  • Higher indemnity costs

Changes in the Workforce

According to the U.S. Bureau of Labor Statistics, 32.4% of the U.S. population aged 55 or older worked in 2000.

In 2020, that percentage climbed to 39.2%.

In 2021, 23% of the U.S. workforce was older than 55, which is a 13% increase from nearly 20 years before in 2000.

According to Business Insurance, employees over age 55 account for more than a fifth of lost-time injuries and 31% of costs. Therefore, as the average age of the workforce rises, employers can expect an increase in the number of workers’ compensation claims.

Labor Shortage

The labor shortage has resulted in employers hiring less experienced employees, which has contributed to the rise in workers’ compensation claims.

Industries such as construction and manufacturing are more susceptible to accidents resulting from this change.

Medical Inflation

In 2021, medical price inflation jumped 4.3% from the previous year. This increase also contributed to the rise in workers’ compensation premiums.

Wage Inflation

According to the National Council on Compensation Insurance (NCCI), “the US economy is facing nonuniform wage inflation across the workforce like never before… 

“As wages rise, premiums automatically rise along with workers’ compensation benefits. Wages, premiums, and indemnity benefits typically stay in balance.”

Still Have Questions?

Workers’ comp is a need-to-have insurance policy and a significant cost for most business owners. This considered, the market shifts daily and your broker should work hard to get the best it has to offer.Read on to check out our commercial insurance policies (including workers’ comp!)