Not long ago, we were looking at a home inspector’s workers’ compensation policy. But, unknown to that home inspector, their carrier wasn’t familiar with the inspection industry. Yet, despite their lack of know-how, the carrier didn’t want to turn the home inspector away. Instead, the provider sorted the client in the closest group they already insured: window blind installation.
Thus, with a window blind installer’s workers’ comp policy, the business lacked coverage for many risks their workers faced. For example, since window installers don’t mount roofs, they weren’t covered if a staff member fell off a roof. So, by signing with someone not tuned in to the work they did, the firm’s needs were not met.
What is workers’ compensation insurance?
Since 2050 B.C., leaders have paid sick and injured workers after workplace mishaps. Ancient Greek, Roman, Arab, and Chinese law all declared precise payments for both bodily damages and disabilities. Thus, their laws were the basis for the workers’ compensation insurance we have today. (See Gregory P. Guyton’s “A Brief History of Workers’ Compensation” or AmTrust Financial’s rundown “The History of Workers’ Compensation Insurance.”)
So, workers’ compensation insurance provides staff with access to medical and wage benefits. But, workers’ comp is unlike general liability (GL) insurance, which covers inspection-related bodily injury and property damage claims for non-employees. Plainly, it looks out for people who work for you.
Indeed, by having job-related injury and illness costs covered, workers’ comp protects both employees and employers. Truly, employees work under stress knowing they’re taken care of on the job. And, employers reduce their risk and deter claims.
So, seeing the need for workers’ comp in the industry, we launched our own program in June 2019. For this reason, we’ll go over some questions that arise when shopping for workers’ comp. Hopefully, we can help you make an informed workers’ comp purchase with us or someone else.
What does workers’ comp cover?
Firstly, states decide workers’ comp benefits—unlike any other type of small business insurance. Roughly, that means what is covered from state to state can vary greatly. But, mostly, workers’ comp speaks the points below:
- Medical Bills: At its heart, from doctor appointments to hospital visits, to medications and mobility aids, workers’ comp helps pay for employee illnesses and injuries. And, according to a 2018 report by the National Academy of Social Insurance (NASI), these types of claims are the most common type of workers’ comp claim. Although, they aren’t always the most costly.
- Lost Wages. At times, work-related injuries and illnesses are bad enough that employees are unable to work. As a result, workers’ comp pays a portion of what the employee would be earning while out of work recovering.
- Rehabilitation. Also, workers’ comp may offer medical rehab benefits, like physical therapy. In fact, they can also help pay for vocational rehab. In other words, it helps badly injured workers return to work in a new role.
- Death. Finally, if an employee dies from work-related injury or illness, workers’ comp may help cover funeral costs and lost income.
To help clarify, here are some events home inspection workers’ comp might cover:
- Perhaps, while walking a roof, an employee falls off her ladder and fractures her leg. As a result, she takes a trip to urgent care and then needs three months to recover with physical therapy.
- For instance, while driving to an inspection, an employee gets into a car wreck that hospitalizes him for a day.
- Or, while inspecting a generator, an inspector gets electrocuted by a live wire. Then, he takes a trip to the ER and had an EKG.
Coverage terms and exemptions vary by state. (We explore some of that below.)
When should I carry workers’ comp?
Still, some small home inspection firm owners may not take on the added expense of workers’ comp. Perhaps, owners think that, if they only have part-time or few employees, they don’t have to carry workers’ comp.
Though, even if you have just one worker, experts suggest that you carry workers’ comp. Further, independent contractors and remote workers should be covered under your workers’ comp.
In truth, all 50 states but Texas mandate that small business owners carry workers’ comp. Below, find a quick chart with links of where to go for more info.
Workers’ comp by state
Of course, keep in mind that North Dakota, Ohio, Washington, and Wyoming are monopolistic states. In effect, you can’t get your workers’ comp insurance through a commercial broker like us. Rather, you have to be covered through your state-specific fund.
What happens if I don’t carry my state-mandated workers’ comp?
Frankly, if you don’t carry workers’ comp, and your state requires it, you may be subject to penalties. To clarify, penalties (mostly fines) vary in nature based on a few factors. For instance, how many workers you have, how long you’ve been non-compliant, and whether your non-compliance was willful affects penalties.
Note that, in some states, sanctions are more severe. For instance, non-compliance in states like California, Illinois, Massachusetts, Michigan, and Pennsylvania can lead to jail time.
Yet, even if you’re in one of the non-regulated states, we still suggest having workers’ comp. Despite your best training and safety measures, accidents and injuries can (and do) happen. And although many firm owners create a family-like setting within their companies, a lack of workers’ comp coverage can lead even the best staff members to pursue punitive damages. So, even if an accident or a lawsuit seems unlikely, it’s better to be prepared to take care of your employees and safeguard your assets.
What should I expect to pay?
To point out, some small business owners, including home inspectors, may feel that insurance is too expensive. For instance, if one of their employees gets injured, they reason, they’ll just pay out-of-pocket. However, a careful comparison of the cost of workers’ comp and the cost of a future lawsuit reveal that investing in workers’ comp is a great way to protect your business.
As with all insurance, your workers’ comp premium, or the amount of money you pay the insurance company each policy period, is unique to your business. Thus, carriers use a number of factors to gauge your rate. So, we outline the main factors for you below.
To begin, underwriters select your industry. Thus, by sorting your work into class codes, insurance companies can gauge rates based on perceived risk.
For example, your firm has an administrative team and an inspection team. Because the office staff are exposed to less risk sitting at their desks, they will likely cost less to insure than your staff climbing up on roofs.
Ergo, insurance underwriters determine class-specific rates based on claims data for all businesses with your same classification code. Generally, the lower the on-the-job risk, the lower the workers’ comp premiums.
Then, after looking at your industry, underwriters overlay the economic factors and requirements of your specific state. Therefore, because individual states regulate workers’ compensation insurance, your jurisdiction plays a huge role in determining what you pay.
In 2018, the Oregon Department of Consumer Business and Services (DCBS) conducted a study that ranked all 50 states based on the average premium rates their employers pay. Unsurprisingly, the study found New York, California, and New Jersey have the highest workers’ comp premiums. Meanwhile, North Dakota, Indiana, and Arkansas have the lowest. (See the full study here.)
Next, an aspect that also impacts your workers’ comp rate is your covered employees’ payroll. For each $100 of your payroll, your insurance company charges a rate based on industry classification codes. So, the more workers you have, and the more work they do, the more workers’ comp will cost.
If you’ve carried workers’ comp before, your claims record will factor into your rate. Specifically, based on how your loss run compares to other inspection companies of a similar size, your underwriter will adjust your experience modifier (MOD).
That is to say, as with your errors and omissions (E&O) and general liability (GL) insurance, the more frequent and costly your past claims, the higher your current premiums are likely to be. Though, in contrast to E&O and GL, you can receive premium credits or discounts for less frequent and lower-cost claims.
Therefore, the higher your MOD, the more you pay. Conversely, the lower your MOD, the less you pay. In other words, workers’ comp penalizes unsafe businesses with higher premiums and rewards safe businesses with lower ones.
What features should I look for?
Above all, home inspectors need to be covered in a way that is catered to their needs. In fact, in a recent article, Matt Zender, Senior Vice President of Workers’ Compensation for AmTrust Financial Services, Inc., explained why having just any workers’ comp isn’t enough.
“If a company’s workers’ compensation program is subpar, the weakness can leave the business vulnerable to potential risks and financial disasters—ones that are avoidable with the proper program.”
Likewise, meager or ill-fitting workers’ comp programs can leave firms open to undue risks and costs.
For instance, here are a few of the perks of our program:
Firstly, most carriers don’t do a lot of work with inspectors because they see home inspections as too small or too risky an industry. So, when other providers do run into those needing to be covered, they often label them wrongly—like general contractors, construction workers, or, in the case above, blind installers. And, flawed sorting can lead to severe exclusions, like workers not being covered while using ladders or mounting roofs.
As a result, our workers’ comp caters to your needs. For instance, we give you more options and more value. Further, we work with one of the largest underwriters of workers’ comp in the nation. In fact, this ensures that we meet the unique needs of the industry. And, our carrier’s vast background allows them and us to plan for and adapt with your changing needs.
By and large, as a leader in the home inspection insurance space, we’ve built ourselves around first-rate service. Thus, our workers’ comp policies are backed by the same team you’ve come to know and love through your E&O and GL policies. (To find out more, check out our Facebook reviews here.)
Making sure your claims are covered is one of our chief aims. To that end, we’ve partnered with an insurance carrier backed by the strengths of a Fortune® 500 company. Plus, A.M. Best, the only global credit rating agency for the industry, supports our carrier with an “A-” (Excellent) ranking. In essence, this high score shows our carrier’s fiscal vigor and credit-worthiness.
Protect your staff with workers’ comp
Of course, there are lots of great companies out there. But, not all of them know the industry. So, do your part to abide by state law and protect your workers and business by having workers’ comp insurance. What’s more, do so with someone prepared to meet your unique needs. Get a quote for workers’ comp with us today by filling out our app.