To get the most affordable workers' comp insurance, you need to understand what determines the costs. The rates you pay will depend on several factors related to your business and employees.
One of the biggest factors is the type of work your employees do. Higher-risk jobs like construction, manufacturing, and healthcare typically mean higher premiums. Office jobs and retail positions are usually cheaper.
The number of employees you have and their wages also significantly impact costs. More or higher-paid staff mean higher premiums. Some states set rates based partly on your company's total payroll.
There are a few ways to lower your workers' comp costs. Maintaining a safe workplace, offering wellness programs, using return-to-work programs, and choosing higher deductibles or lower benefit levels can all help decrease your premiums.
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7 Tips to Get the Cheapest Workers' Comp Rates
To get the most affordable workers’ compensation insurance for your business, here are some tips to lower your rates:
1. Shop Around at Different Insurance Carriers
Compare quotes from various insurance providers to find the most competitive rate. Some carriers specialize in certain industries or business sizes and may offer lower premiums. Get at least three quotes from different companies for the best comparison.
2. Increase Your Deductible
The higher your deductible, the lower your premium will be. If you can afford to pay more out of pocket for claims before your insurance kicks in, choose a deductible of $1,000 or $2,500 instead of the standard $500. This can lower your rates by up to 25-30%.
3. Improve Workplace Safety
Implement programs and policies to prevent workplace accidents and injuries. Things like safety training, job hazard assessments, proper protective equipment, and injury response plans can help create a safer environment for your employees. Fewer claims will ultimately mean lower premium costs.
4. Pay Annually Instead of Monthly
Most carriers charge lower rates if you pay your entire annual premium upfront instead of in monthly installments. You can save up to 10% by paying in full for the year. If the initial cost seems too high, see if they offer a semi-annual or quarterly payment plan for at least some savings.
5. Maintain a Good Experience Modification Rating
Your experience modification rating or “mod factor” compares your company's claim history to the average for your industry. A rating of 1.0 is average. Below 1.0 means you have better than average claims, so you qualify for lower rates. Focus on safety and accident prevention to keep your mod factor low.
6. Bundle with Other Policies
Buy multiple insurance policies from the same carrier, such as business insurance, commercial auto, and general liability. Bundling can earn you a multi-policy discount of 5-20% off your premiums. The more policies you bundle, the higher percentage you can save.
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FAQ: Answers to Common Questions About Lowering Workers' Comp Premiums
Here are some of the most frequently asked questions about how to reduce your workers’ comp premiums:
1. How can I lower my workers’ comp classification code?
Your workers’ comp classification code is determined by the type of work your employees do. You may be able to lower your code by reclassifying some job positions to a lower risk category. For example, if you have clerical staff, you can reclassify them as “clerical office employees” which has a lower rate than “general office employees”. You’ll need to check with your insurance carrier to make sure any reclassifications comply with state regulations.
2. Should I increase my deductible?
Raising your deductible, the amount you pay out of pocket for each claim, is one of the simplest ways to lower your premiums. The higher your deductible, the more you’ll save on your premiums. But make sure you can afford the higher out-of-pocket costs in the event of a claim.
3. Can a workplace safety program help?
Absolutely. Implementing an workplace accident prevention and safety program shows your insurance company you are serious about reducing risks and claims. Things like new employee orientation, ongoing training, posted safety signs, protective equipment, and regular inspections can all help make your workplace safer and lower your premiums over time.
4. How often should I shop around for other quotes?
It’s a good idea to compare quotes from other insurers at least once every couple of years. Rates and discounts often change, and you may be able to find lower premiums by switching to another carrier.
When comparing, check not just the base premium but also the discounts and coverage options. Even if you don’t switch insurers, you can use a lower quote from a competitor to negotiate a better rate with your current carrier.
