Workers Compensation insurance is an important component of the protection that business owners must afford their employees. It helps to cover things like lost wages and medical treatment arising from work related injuries or illness. Of course, not all businesses are equal. Some, such as carpenters, roofers, and equipment operators are more vulnerable to injuries and are therefore considered “high-risk” by insurance companies.
Compensation rates are primarily based on the industry in which you operate and will vary from state to state. Because of the perceived higher risks in industries such as those mentioned above, acquiring plans from mainstream providers can prove difficult. Furthermore, if your company has made multiple claims in the past, or has violated any state safety laws, those infractions could further limit your insurer options.
With the options for products such as high risk contractors insurance limited, many businesses default to an assigned risk pool or state fund. This is the the least flexible and most expensive option. It often creates gaps in insurance coverage, too. Especially for businesses with employees that work out of state. The added complexities of high risk workers comp coverage makes it highly important that business owners consult with their agent or broker.
Why getting workers compensation insurance is difficult in certain industries.
Generalized trade – Construction companies that operate in multiple trades are deemed more risky than those that specialize in one or two specific areas. That is because the chances of making a claim are deemed to increase with each additional trade.
Heights – Insurers are nervous about offering coverage for workers who operate at heights. That is because the payout for employees falling from above 15 feet is considerably great. Getting the right coverage for employees, such as tree trimmers requires careful assessment of the workers equipment and other important details before submission to the underwriters. Many businesses fail to secure coverage because they, or their agent do not provide sufficient information to the underwriters.
Instability – Workers Compensation insurance carriers were hit hard when the economy fell in 2008. They faced both an increase in claims from construction businesses as well as a reduction in premiums as the industry reduced its employees. As a result, insurers are cautious about offering products in unstable industries. If you are able to demonstrate a consistent payroll, your chances of success will increase.
1099 subcontractors – Insurers are wary of businesses that pay for the majority of their labour by 1099 rather than w-4. One of the main reasons for the reluctance to insure in this category is concerns over a subcontractors failure to pay their workers compensation premiums. If the subcontractors policy is cancelled, the original contractor’s policy will likely bear the burden for any claims.
Running a business in a high risk industry means it is more challenging than normal to get the best workers comp rates. That is compounded by an unstable economy. Through careful analysis of your business and other details, however, you may find that you have more solutions available to you than you first thought possible.