Many people are unclear as to the specifics of their Workers Comp policy. They know they are legally obligated to have it. The rest is murky. Exactly how is the premium developed? Is the audit mandatory? What happens if you decline to do the audit? Is it the same as health insurance?
If a worker gets injured, will insured be paid the limit of the policy? If I have Workers’ Comp, do I need Employers Liability? All of these and many more are fielded regularly, let’s have a closer look at the Workers’ Comp policy & we will answer many of these questions; not necessarily in the order questions were presented.
Workers’ Compensation and Employers Liability are typically purchased together on the same policy. As the employer is putting their employees in harms-way while working; the Workers’ Compensation component covers an employees medical bills regardless of fault for injuries sustained while working.
The Employers Liability component will cover the employer against work related injury claims not covered by the Workers’ Compensation.
The States will pay for medical costs as well as disability as a result of a work related injury. They do not make a payment to the employer of $100,000 or $500,000 or $1,000,000 if an employee gets injured. This would be a moral hazard and could induce corrupt employers to allow worker injuries to take place.
It CAN take the place of Health insurance for the worker if they sustain a work related injury. For example, a worker cuts themselves and goes to the emergency room.
By providing the Workers’ Comp policy info as opposed to their Health Insurance they will not need to pay the deductibles associated with their personal health insurance policies as the injuries were work related.
Because no employers can predict payroll for an upcoming year; estimated payrolls by work classification are presented to the carriers. The carriers then work up estimated annualized premiums. All Workers Comp policies are subject to audit upon policy expiration. This gives the company and the employer the opportunity to true up.
If the payroll was overestimated, the insurance carrier will give the employer a credit. Conversely, if the payroll was underestimated, an additional audit premium would be levied to the employer.
Should an employer decline to allow for an audit, the carrier can assume an estimated audit. Whereby, they essentially make up a payroll and associated premium due. It is crazy to allow them to do this. Prudent employers will allow the audit and settle with the carrier.
Finally, there are payroll reporting options which notify the carriers of actual payroll as its disbursed to minimize audit exposure.
The bottom line is that there are multiple moving parts related to a Workers’ Comp policy. It is critical to work with a qualified representative who can analyze not only your risk, but your buying preferences to deliver the product that best meets your buying needs. There are multiple options and you needed to procure a tailored policy.