If you even have just one part-time employee, this coverage is required by California State Law.

You can save money, time and avoid aggravation with your workers compensation coverage by understanding how it works; what the insurance company is required by law to do for you and your injured employee; and how the insurance company thinks.

The rate you pay may vary from one insurance company to the other. All workers compensation insurers must provide specific coverage. All employees, by law, are required to have workers compensation insurance (California Labor Code 3700-3709.5)

If you have workers compensation insurance and an employee is hurt on the job, by law, the workers compensation benefits are the employee's sole remedy. If you don't have workers compensation coverage for an employee's injury, that employee can seek compensation directly from you that may be limited only by his/her imagination. This is how Worker's Compensation coverage protects YOU.

The basic cost factors of your workers compensation are:

What your employees do for you (their class). A teacher has a different class than a carpenter or a retail clerk or an employee at a glass factory.

The amount they are compensated (remuneration). Remuneration also includes the value of meals, transportation, housing, tuition discounts and anything else you give your employees that can be measured in money.

The frequency and extent of injuries they have had (losses & loss ratio).

Your exact premium is determined by audit. Your projected cost is based on projected remuneration. You will usually have interim audits during the course of the policy term to regularly adjust your cost to accurately reflect your real remuneration. It also lets you make premium installments. Interim audits can be set up monthly, quarterly, semi-annually or at the policy's anniversary. Usually audits are done using the mail. The insurer is relying on you to provide accurate figures. If you ignore the audit or are slow returning it to them, they can send an auditor to physically determine your remuneration and class codes...(they can do this even if you respond quickly). Non-cooperation or non-payment of an interim audit will almost certainly result with a cancellation. Even if the cancellation is rescinded (and it may not be), you may forfeit possible dividends that require, among other things, that you maintain coverage in full force for the full policy term.

Near the end of the policy term, you will be asked to complete a final audit. If the interim audits were done correctly, all you have to do is add them up and put your totals on the final audit form. But this is not always a perfect world. Sometimes an error is found or made or corrected. Usually the insurer will request copies of DE6's to correct errors in your favor.

Sixty to ninety days prior to your renewal date (anniversary date), in writing, request a copy of your loss runs from your current insurer for your records. Loss runs will list any claims that have been reported, paid, reserved, opened, closed or are still pending. A claim is closed after the employee has been made whole and everything about the claim has been settled. If there has been a claim, it is not unusual for the insurer to set aside or reserve an amount of money that they expect top pay. Even though they may not have actually paid, they will compute your loss ratio as if they had.

Your loss ratio is the amount of money spent (or reserved) to settle your claims divided by the sum of premium you paid. The lower your loss ratio, the greater likelihood that you will merit a lower rate. Some insurance companies are slow to remove reserves, so you want to bring "old" reserves to their attention.

Insurance companies know there will be claims, but they expect your help to lower the severity and frequency of those that occur.

Do you have Employees or Independent Contractors ?

If you use independent contractors make sure that you have current certificates from them proving they have workers compensation. There is a thin, frail dotted line separating independent contractors from employees. One condition that identifies an independent contractor is that s/he has his/her own insurance. In an audit, you may be asked to show an auditor current certificates for all your independent contractors. Failure to comply usually means that the value you paid to each independent contractor will be included as remuneration you paid and you will be charged an additional premium!

If an independent contractor is hurt on your premises, s/he, its family and their attorney(s) may have selective amnesia - only you will remember that the worker was an independent contractor. Even if you have a contract and a hold harmless agreement, "that's not what they thought it meant". You end up in court and you and your insurer will have to pay. Current law tends to favor the employee. You need certificates before s/he starts work.

You can save time, money, avoid aggravation and get the right coverage!