7 Deceptions to look out for when buying Workers Comp:
If you are a new business, or you have decided it’s time for a new Workers Comp policy, there are a few tricks you really need to be aware of so you don’t get stuck with a very unpleasant surprise! But first, let’s look at what Workers Comp (WC) policies do for you:
- A WC policy protects YOU from future claims. It’s the only way to protect your business, your family, and your good name in case of claims today and in the future. In many states, an employee who is injured can pierce your corporate veil, and the business owner becomes personally liable – unless you have Workers Comp!
- It provides for your employees when they are injured on the job, and helps them heal and recover, so they can get back on the job as quickly as possible.
- It shows that you are a real company, and allows you to bid on larger jobs, it allows you to work in more profitable businesses, and often at a better margin!
Have you seen these red flags?
What could possibly be the problem when buying workman’s compensation? For me, that’s an easy question to answer! Would you rather pay retail, or would you rather buy your supplies, your HR, your benefits, and your Workers Comp for the wholesale price? If you are buying your Workers Comp from your local agent, you are paying RETAIL! Let’s look at some tricks agents use to get you a new policy, and how it can hurt your business, your profits, and your growth.
- Using lower payroll: Check carefully and make sure your quote includes ALL of the taxable wages you expect next year. If your agent uses a smaller number for wages, you are going to have to ‘true up’ the shortage at the end of the year. So just when you were thinking you were going to make a profit, your insurance agent tells you that YOU OWE MONEY! Not good!
- Using cheaper class codes: Your insurance rate is based on your agent properly identifying the correct code for your business practices. If the proper code is a little more expensive, then your rate may be higher than his competition. You probably don’t know the correct codes, and it may not be a big deal. But if you get audited, it can be a BIG problem for you! YOU OWE MONEY!
- Using more expensive class codes: If your proper code is a little less expensive, your good old buddy that’s been your agent for so many years may write you with a more expensive code, or more expensive codes! YOU PAY MORE MONEY – and he makes more commission!
- Last minute rate increases: Did you get a last-minute rate increase? If you were considering not renewing your current provider, sometimes there just accidentally happens to be a problem getting you your new rates. Agents know that it may take a week or three to get you a new quote, and if you are getting a big increase, don’t be surprised if it arrives at the last-minute!
- Withholding loss runs: Can’t get your loss runs? Agents know it takes loss runs (a list of the claims against your workers comp policy) to get a new policy. And most agents know that if you are asking for loss runs there’s a good chance it’s to move your insurance somewhere else. They also know they are required, by law (which varies by state) to give them to you. So if it’s near renewal time, don’t be surprised if they arrive at the same time your renewal notice arrives, right before your policy expires.
- Overpayments being held hostage: Does your Workers Comp carrier owe you money? Don’t be surprised if you are owed money, and it takes 3-4 months to get your premium overpayment or credit back. You are required to get your overpayment back, but sometimes it’s held up for some reason. You know the drill – if you owe me money, I want it now. And if the insurance company owes you money, they don’t seem to be in any hurry. The carrot here is that you want your money back, and you are subconsciously concerned that you won’t get it unless you buy from the same folks. Under normal circumstances, premium reimbursements should take about 60 days.
- Not getting the attention you feel you deserve? You are probably right, you aren’t. Most agents that write Workers Comp also write your Commercial Auto, your General Lines business insurance, Commercial Property, maybe your personal car insurance, Life Insurance, and other policies. Frankly, your agent really doesn’t make that much on Workers Comp, and most really don’t have the time (or the experience) that really needs to be invested in managing your claims, working to keep your losses down, and to get your people back to work.
Why you should consider buying Workers Comp from a Specialist:
Here is where a PEO like Eagle can help:
- No big down payment! A PEO is usually a ‘pay as you go’ way to buy Workers Comp, so your payments are made each pay period, based on your actual taxable wages paid during that pay period. Your pay period can be weekly, bi weekly, twice a month, or monthly, or in between!
- There’s no ‘True Up’ at the end of year! Because your Workers Comp is paid each pay period, there’s no year-end audit to establish whether you owe more money. It’s simple- you don’t.
- Buy wholesale – not retail! One of the ways you save money is because you are not buying a new retail policy, you are part of the PEO’s master policy. You benefit from the buying power of the PEO! Don’t pay retail!
- Get help keeping claims low! Claims are kept low because it is in both yours and the PEO’s best interests to manage those claims, and get your employees healthy and back to work. This saves you money and helps keep your employees healthy and working.
- Safety Programs are professionally run and managed. The fact is that safety programs help keep workers safe and claims low. A PEO puts safety specialists on YOUR team!
- Help ensure proper coding. Because the PEO shares the employees with you, the PEO wants to be sure that all employees are assigned the proper workman’s comp codes. So you are assured that your employees are coded correctly. Again, no year-end true up.
- State Unemployment Taxes are kept low, because the PEO works to make sure that your former employees find a new job as quickly as possible!
The bottom line really is the bottom line, and Eagle can help you increase your bottom line by providing you, the business owner, the economies of scale that a big company may have developed. You’ll get professionals doing the jobs that your people do, often on a part-time basis, when other duties allow. Our customers stay with us an average of 9 years, so we are definitely doing a lot of things right! And, your insurance agent may love us, because we can do a great job for you, he still gets paid, and we don’t compete with them on any of their other products! You WIN!
7 Deceptions to look out for when buying workers comp