What is workers compensation insurance?
The potential for on-the-job injury is present across almost all industries, and in almost all work environments. Should an employee be injured while working, their employer might be held financially responsible if workers compensation insurance isn’t in place. This is thusly an important insurance coverage for many California businesses.
Workers compensation insurance uniquely protects against claims arising from on-the-job injuries and illnesses. In the event of an injury, the insurance can benefit both the employer and the employee.
What California businesses need workers comp insurance?
California generally requires that all businesses which have employees carry workers comp insurance. Businesses usually need coverage from the first day that they bring on a worker.
Failing to procure workers compensation when it’s required can be a criminal offense under the California Labor Code. It’s classified as a misdemeanor, and can result in a fine of at least $10,000 and/or up to one year in county jail.
Of course, not having the insurance also leaves businesses directly exposed to lawsuits that injured employees might file.
What types of claims are covered by workers comp insurance?
Workers comp insurance generally protects against workplace injuries and illnesses that employees suffer. Coverage often extends to sudden incidents (e.g. machinery injury, poisoning) and long-term conditions (e.g. repetitive motion injuries, asbestos exposure). Coverage normally also applies if the employee dies, rather than sustains an injury or illness.
Businesses should make sure that their workers compensation policy meets state requirements, and adequately protects against the injuries and illnesses that their workers are most at risk of. An insurance agent who specializes in workers comp can help businesses choose a robust policy that provides the needed protections.
What are workers comp insurance codes?
Workers compensation policies usually classify employees according to the industry they work in. The classifications are made by numerical code, which is standardized by the National Council on Compensation Insurance (NCCI). The following are some examples of classifications and their corresponding codes:
- 8803: financial auditors and accountants
- 0005: farms operations that are nurseries
- 2041: chocolate and cocoa manufacturers
- 7038: smaller sightseeing watercraft
- 8829: nursing and convalescent homes
In some cases, NCCI codes are even more specific. Code 2143 is for cider manufacturers, and 5190 is for Christmas/holiday decorators.
An insurance agent who’s familiar with workers comp policies can help businesses ensure their employees are properly classified according to NCCI standards.
Do businesses need workers compensation when hiring independent contractors?
Workers compensation is usually required when businesses hire employees, who receive W2 tax statements at year’s end. Coverage requirements are less clear when independent contractors and subcontractors, who receive 1099 tax statements, are hired.
Because contractors technically operate their own business, businesses that hire them frequently aren’t required to purchase workers comp for independent contractors. In some cases, however, businesses might still be required to procure coverage.
Each situation involving contractors should be carefully reviewed with a knowledgeable agent, to make sure any necessary coverage is in place.
What’s a workers compensation audit?
Workers compensation premiums are set at a policy’s start, according to employment estimates that a business provides.
Businesses’ estimates aren’t always accurate to what’s actually transpires, though. Employees are hired, laid off, and fired, and their pay can change with reviews, raises, promotions and demotions. Premiums are based largely on the salaries that businesses pay, and it’s impossible to guarantee that estimates are going to be perfectly correct.
Businesses are expected to provide good faith estimates, but insurers understand that actual salaries will likely differ from estimated ones. The purpose of a workers compensation audit is to correct premiums for what was actually paid to workers. The actual salaries paid are checked, and a fee or refund may be issued depending on whether the actuals were more or less than what was estimated.
How can businesses get workers compensation insurance?
For help finding workers compensation insurance in California, contact the independent insurance agents at Heffernan Walton Insurance. Our agents will work closely with you to make sure your business gets the workers comp coverage it needs.