Workers’ Comp for Home Inspectors: Everything you need to know
Several months ago, we were reviewing a home inspector’s workers’ compensation policy. Unbeknownst to that home inspector, their insurance carrier wasn’t familiar with the property inspection industry. Despite their lack of experience in the inspection space, the carrier didn’t want to turn the home inspector away. Instead, the insurance company categorized (or grouped) the home inspector in what they perceived to be the closest type of business they already insured: window blind installation.
With a window blind installer’s workers’ comp policy, the home inspection business lacked coverage for many of the unique risks their employees faced. For example, since there’s no need for a window installer to mount a roof, the home inspection company didn’t have coverage in case their employees fell off an inspection property’s roof. Thus, by pairing up with a workers’ compensation provider unfamiliar with their business, the home inspection company’s needs were not being met.
What is workers’ compensation insurance?
Since 2050 B.C., governments have granted sick and injured laborers payment after workplace accidents. Ancient Greek, Roman, Arab, and Chinese law all dictated precise payments for both bodily impairments and disabilities. Thus, their legislation laid the foundation for the workers’ compensation insurance we have today. (For more on workers’ comp’s history, see Gregory P. Guyton’s “A Brief History of Workers’ Compensation” or AmTrust Financial’s summary “The History of Workers’ Compensation Insurance” and the video below.)
Workers’ compensation insurance provides employees who suffer from work-related injuries or diseases with access to medical and wage benefits. Unlike general liability (GL) insurance, which covers inspection-related bodily injury and property damage claims for non-employees, workers’ compensation looks out for people who work for your company.
By covering job-related injury and illness costs, workers’ comp protects both employees and employers. Employees work under less financial risk knowing they’re protected on the job. Additionally, employers limit their liability and deter litigation.
Recognizing the need for workers’ comp in the home inspection industry, we launched our own workers’ compensation insurance program in June 2019. In this article, we go over some of the common questions inspectors do (and should!) ask when shopping for a workers’ comp policy. We hope that the information outlined here can help you make an educated workers’ comp purchase with us or another provider.
What does workers’ comp cover?
Individual states determine specific workers’ compensation benefits—which is unlike any other type of small business insurance. Basically, that means that coverage from state to state can vary dramatically. But typically, workers’ comp benefits address one of the following concerns:
- Medical Bills: From doctor appointments to hospital visits, to medications and mobility aids, workers’ comp helps pay to treat employee illnesses and injuries. 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, but they aren’t always the most costly.
- Lost Wages. Sometimes, work-related injuries and illnesses are bad enough that employees are unable to work. Workers’ comp insurance can pay a percentage of the
- money the employee would be earning as they’re out of work recovering from their accident.
- Rehabilitation. Workers’ comp policies may offer medical rehab benefits, like physical therapy, to help employees recover. They can also help pay for vocational rehab, which helps severely injured employees no longer able to perform their previous jobs the ability to return to work in a different role.
- Death. If an employee died because of a work-related injury or illness, the employer’s workers’ comp insurance may help cover funeral costs and lost income.
Here are some examples of events a home inspection workers’ compensation policy might cover:
- An employee falls off her ladder and fractures her leg. She took a trip to the emergency room, and the doctor says she needs three months off the job to recover plus physical therapy.
- On their way to an inspection, an employee gets into a car accident that hospitalizes him for a day.
- While inspecting a generator outside, a home inspector gets electrocuted by a live wire. He took a trip to the ER and had an EKG.
Coverage requirements and exemptions vary by state. (We explore some of that variation below.)
When should I carry worker’s compensation insurance?
Some small home inspection business owners may feel disinclined to take on the added expense of workers’ comp. Inspector owners may reason that, so long as they only have a few employees or mostly part-time employees, they don’t have to carry workers’ compensation coverage.
However, even if your inspection employee has just one employee, insurance experts recommend you carry workers’ comp. Even independent contractors and remote employees should be covered under your workers’ compensation insurance.
In fact, all 50 states but Texas mandate that small business owners carry workers’ compensation insurance policies. Find a quick chart with links of where to go for more state-specific info.
Keep in mind that North Dakota, Ohio, Washington, and Wyoming are monopolistic states. That means that you can’t get your workers’ comp insurance through a commercial broker like us. Rather, you have to get coverage through your state-specific fund.
What happens if I don’t carry my state-mandated workers’ comp?
If you don’t carry workers’ comp, and your state requires you to, you may be subject to regulatory penalties. Penalties (usually fines) vary in severity based on factors like how many employees you have, how long you’ve been non-compliant, and whether your non-compliance was intentional.
In some states, punishments are more severe. For example, non-compliance in states like California, Illinois, Massachusetts, Michigan, and Pennsylvania can lead to jail time.
Even if you’re in one of the few non-regulated states, we still recommend carrying workers’ comp. Despite your best training and safety measures, accidents and injuries can (and do) happen. And although many home inspector owners create family-like environments within their companies, a lack of workers’ comp coverage can lead even the best employees 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?
Some small business owners, including home inspectors, may feel that insurance is too expensive. If one of their employees gets injured, they reason, they’ll just pay out-of-pocket. However, a prudent comparison of the cost of a workers’ comp policy and the cost of a potential lawsuit reveal that investing in workers’ comp is a great way to protect your business.
As with all insurance, your workers’ compensation premium, or the amount of money you pay the insurance company each policy period, is unique to your business. Carriers use a number of factors to determine your rate, the primary of which we outline below:
First, insurance underwriters identify your industry. By categorizing your type of work into classification codes (or class codes), insurance companies can estimate policy rates based on perceived risk.
For example, your home inspection firm has an administrative team and an inspection team. Because the office staff are exposed to less risk of injury or illness sitting at their desks, they will likely cost less to insure than your inspectors climbing up on roofs.
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.
After looking at your industry, underwriters overlay the economic factors and requirements of your specific state. 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. 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.)
Another factor that impacts your workers’ comp rate is your covered employees’ payroll. For each $100 of your payroll, your insurance company charges a specific rate based on the industry classification codes discussed earlier. So, the more employees you have, and the more work they do, the more workers’ comp will cost.
Experience (Claims History)
If you’ve carried workers’ compensation before, your claims history will factor into your rate. Based on how your claims history compares to other home inspection companies of a similar size, your underwriter will calculate your experience modifier (MOD).
As with your errors and omissions (E&O) and general liability (GL) insurance policy, the more frequent and the more expensive your past claims, the higher your current premiums are likely to be. However, unlike your E&O and GL policy, you can receive premium credits or discounts for less frequent and lower cost past claims.
The higher your MOD, the more you pay. The lower your MOD, the less you pay. Said another way: Workers’ comp policies penalize unsafe businesses with higher premiums and reward safe businesses with lower premiums.
What features should I look for in a workers’ comp policy?
Home inspectors need coverage catered to their needs. In a recent article, Matt Zender, Senior Vice President of Workers’ Compensation for AmTrust Financial Services, Inc., explained why having just any workers’ comp coverage 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.”
Furthermore, insufficient or ill-fitted workers’ compensation programs can leave home inspection businesses vulnerable to unnecessary risks and financial costs.
Here are a few of the benefits of our particular program:
Most insurance carriers don’t do a lot of work with home inspectors because they see property inspections as too small or too risky an industry. So, when traditional workers’ comp providers do run into inspectors needing coverage, they often categorize them as something else—like general contractors, construction workers, or, in the case above, blind installers. Incorrectly categorizing inspectors as a different type of professional can lead to serious exclusions, like no coverage when your employees use ladders or mount roofs.
Here at InspectorPro, our workers’ compensation program caters to home inspectors like you, giving your business more options and more value. We work with one of the largest underwriters of workers’ comp in the nation to ensure that we meet the coverage needs unique to the home inspection industry. In addition, our carrier’s extensive experience gives them and us the insight to anticipate and accommodate your changing needs.
As a leader in the home inspection insurance space, we’ve built a reputation around superior customer service. Our workers’ compensation policies are supported by the same team you’ve come to know and love through your E&O and GL policies. (Check out our Facebook reviews here.)
Making sure your claims are covered when coverage is due is one of our top priorities. That’s why we’ve partnered with an insurance carrier backed by the services and financial strength of a Fortune® 500 company. In addition, A.M. Best, the only global credit rating agency for the insurance industry, supports our carrier with an “A-” (Excellent) ranking to indicate their financial strength and creditworthiness.
Protect your employees with workers’ comp
There are lots of great insurance companies out there. But, not all of them are familiar with the home inspection industry. Do your part to abide by state law and protect your employees and your business by carrying workers’ compensation insurance. And do so with a company prepared to meet the inspection industry’s unique coverage needs. You can apply for a workers’ comp for home inspectors with us today by completing the application.