Workers Compensation Insurance in Virginia with Cothran Insurance
Workers Compensation is where our Insurance Agency Shines
Reducing your workers compensation insurance cost can be challenging because it has a lot of moving parts. You have your class codes, your rates per hundred, your Experience Modification Rate, claim frequency, claim severity and the list goes on.
But what does it all mean and how can you use that information to reduce premiums? That is where we step in and bring it all together.
First, since we are an independent agency, that means that we have access to a number of insurance carriers to make sure we are getting you the best rate. There is no single insurance company that is cheapest for every single industry. So we submit to several insurance companies to secure you the lowest premium.
Second, by analyzing your Experience Mod, we can identify loss trends and help you develop and implement safety workplace and return to work programs.
Third, through ongoing claim reviews we can close out stagnant open claims and reduce claim reserves for active claims prior to your Experience Mod being promulgated saving you even more money.
Our hands on approach not only saves money on your Workers Compensation insurance through lower Experience Mods but also by reducing claim frequency and claim severity which makes your account more desirable to the right insurance company which translates into a lower workers compensation insurance rate.
Call us for a free Workers Compensation Insurance quote today!
What is workers compensation?
Workers compensation coverage can protect your business from financial hardship due to workplace injuries. If an employee were to be injured or become ill during the normal scope of business then their medical bills, lost wages and even death benefits can be covered by workers compensation.
What claims should I turn in?
Simply put…all of them. It even saves you money to turn in the smallest of medical only claims.
During our analysis of your Experience Mod, we will show you how even turning in a small $300 medical only bill can save you money over the long term. The reason for this is NCCI, who promulgates your Experience Mod, only uses 30% of the total cost of the claim if the claim is medical only, meaning that your employee didn’t miss anymore than 7 days of work.
So while your Experience Mod may go up due to the $300 medical only bill, the impact it has on your premiums for the 3 years that the claim remains on there may only increase your total premiums by $60 per year. So you can either pay $60 more in Workers Compensation premiums each year for 3 years or pay that $300 medical only bill yourself. From a cost effectiveness approach, it makes more sense to pay the lesser amount over 3 years and you just saved $120.
Also, work related injuries may start off small but can snowball into something greater later if complications arise. If you don’t put the workers compensation insurance company on notice early enough about a potential claim so that they have time to do an investigation, they can deny the claim even though it was a valid workers compensation claim.
I had a customer who had an employee drop a trashcan on their foot and only suffered minor injuries that resulted in a simple doctor visit bill. However, the employee left their employment and a year later claimed that due to the injury to his foot that his foot developed gangrene and he had to have it amputated. Had we not turned the claim in until a year later the insurance company could have denied the claim and the employer would have been solely responsible for not only defending his case but also for any resulting medical bills and lifetime disability benefits.
Will my business insurance cover injuries for my employees?
Generally speaking, Business Liability insurance protects your business for claims as a result of bodily injury or property damage that occur on your premises, as a result of your operations, that occur after you have completed your operations or for the products you sell. However, it specifically excludes any injury or illness to employees if the injury or illness occurs during the scope of their normal employment. That is what Workers Compensation insurance is for.
Who is required by law to carry workers compensation insurance?
Not every small business owner is required to carry workers compensation insurance in the state of Virginia. The state requires that any business with 3 or more employees in the state of Virginia is required to carry workers compensation insurance.
However, who counts as an employee is different depending on how your business is structured. For instance, a sole proprietor is not considered an employee of the company. So if a sole proprietor has two employees, the state views his company as only having two employees and he is not required to carry workers comp, assuming he doesn’t sub any work out. I’ll discuss subs shortly.
Now let’s assume that the sole proprietor decides he wants to incorporate and he is the President and only Officer or Director of the company but he still has those same two employees. The state now views his company as having three employees because the state views him as an employee of the corporation now and workers compensation insurance is required.
Limited Liability Companies or LLC’s are very muddy in the state of Virginia when it comes to Workers Comp and they recently released some clarification on this very topic. To summarize:
· LLC’s who only have one member do not count that one member as an employee
· Members of an LLC who are not active in the business do not count as an employee
· Members of an LLC who are active in the business DO count as employees
For those that sub work out, the employees of your sub are considered your employees in determining how many employees you have. This is whether your sub has their own Workers Compensation policy or not. So, for example, let’s assume you are a sole proprietor with no employees but you sub work out to someone who has 5 employees that has their own Workers Compensation policy. The state views you as having 5 employees and therefore you are required to carry Workers Compensation. This is an issue that many contractors face.
If you have questions as to whether or not you are required to carry Workers Compensation or not, please contact us for a free consultation.
I’m the only Officer and Director and have 2 other employees. Is There a way to not be required to carry Workers Compensation?
If you are incorporated, you are the only Officer and Director of the company, you are not paid a salary or wages on a regular basis at an agreed amount and you have 2 or fewer other employees and do not sub any work out, then there is a long complicated way to exclude yourself from counting as an employee so that the state only counts you as having 2 employees and therefore not required to carry Workers Compensation but that would require that you contact us to start the process. Until we completed that process, which can take up to 60 days, you would be required to carry Workers Compensation because the state considers you to have 3 employees.
What happens if I decide not to carry workers comp?
Workplace accidents can happen to any business no matter how careful or how many safety measures are implemented. If an employee is injured during their course of employment, and your business meets the state requirements for having to carry workers comp but chose not to, then your business will ultimately be responsible for the medical costs and lost wages due as a result of any injuries or illnesses sustained during the course of employment by your employee.
In addition, the state of Virginia may fine you up to $250 per day that you were without workers comp up to $50,000 for not carrying workers comp when you were required to. However, this fine isn’t only imposed if an employee is injured when you were required to carry workers compensation but chose not to. If the state finds out even prior to any injuries or illnesses that you are required to carry workers comp but have not then they can fine you for the same $250 per day up to $50,000.
What happens if my Workers Compensation policy is cancelled?
If your Workers Compensation policy cancels, you may receive a letter from the Virginia Workers Compensation Commission asking why your policy cancelled. If you replaced coverage through another carrier, you should give the letter to your agent for him to take care of or you can merely fill the form out with the new carrier information, sign it and send that in to the fax number or email address on the form with a copy of your new workers compensation declarations page.
If you did not replace coverage through another insurance company then you need to tell them why you cancelled your policy. If you cancelled it because you are out of business or your number of employees dropped below 3 then you need to indicate that on the form, sign it and send it in. However, keep in mind that if you sub any work out or if you are an LLC or are incorporated, the way the state determines your number of employees can get complicated so you should verify with your agent prior to determining yourself that you are no longer required to carry Workers Compensation.
What is a Workers Comp audit?
At the end of each policy period the state requires that the insurance companies audit you on your payroll. The reason for this is that the payroll and class codes used on your policy are merely an estimate of what you anticipate your payroll to be for the upcoming year.
After your policy renews or is cancelled, you will receive a notice from the insurance company requestin an audit to be completed. There are several ways they may complete the audit.
They may send you a form to fill out which you can either do yourself or send to your bookkeeper or CPA. The form will ask for a description of your operations and will want a breakdown of payroll per employee along with a description of what each employee does so that they can classify them correctly. For instance, if you are a contractor and you have some employees doing plumbing and some doing electrical work, those two classifications are rated separately so the insurance company will want to know which employees do plumbing and which do electrical.
They may do a phone interview.
They may come out and do an actual physical audit where they schedule a time and place to meet you to gather all of this information.
You should always try and have your audit completed within 30 days of your policy renewing so that any new exposures are picked up for the upcoming year such as working in additional states or additional class codes.
It is also advisable for you to have your current policy term updated to reflect the same payroll that the audit shows.
What information do I need to have for a Workers Comp audit?
Depending on your operations the insurance company may request any or all of the following:
· Payroll records
· 941s or Schedule C Tax Form
· Form 944
· Owners, officers and partner information including ownership percentage
· 1099 forms
· Certificates of insurance for any work sub’d out
· General Ledger
· Sales Journal
· Cash Receipts
· Sales tax records
· A detailed description of your business operations
What happens if I don’t complete my end of the year Workers Compensation audit?
If you don’t complete your audit and the insurance company marks you as non-compliant, one of two things can happen and neither of them are in your favor.
· The insurance company may decide that they will just estimate your audit for you. Usually if an insurance company takes this route they will use either double or triple the estimated payroll which means that you will end up owing the insurance company a payment immediately equal to 100% or 200% of your previous year’s workers compensation premium all at once since they typically will not allow a pay plan for a non-compliant audit.
· The insurance company may decide to cancel your policy. If they take this measure then they will also notify NCCI (National Council on Compensation Insurance) who is the insurance rating and data collection bureau for the state of Virginia. When this occurs, NCCI will notify every other insurance company in the state of Virginia that you are not compliant on your previous audit which makes you ineligible for Workers Compensation insurance with every carrier in the state. If you are required by the state to carry workers comp, then this opens you up to fines and penalties from the state up to $250 per day you are without Workers Comp up to a maximum fine of $50,000. You then won’t be able to apply for Workers Comp with any insurance company until the audit is completed and marked as compliant which can take up to 60 days all along being fined $250 per day for not having workers comp during that time period.
What if you do work in multiple states?
Workers compensation laws do vary by state and if you perform work in other states then you need to be familiar with the workers compensation state law for that particular state to see if you are required to carry workers compensation.
Any state you currently perform work in at the time of the effective date of your policy must be listed in part 3A of the policy, otherwise you will not have any coverage for that state. It will also provide coverage for those states listed in part 3C of the policy if you were to start operations in those states during the policy period. However, you only have coverage for those states in part 3C up to 30 days after the policy renews and if you continue to operate in those states beyond that time then those states have to be added to part 3A of the policy. Otherwise, you will no longer have coverage for those states.
That 30 day window is a major reason for wanting to have your workers compensation audit completed within 30 days of the policy renewing because if you started work in another state during the policy period then it will be picked up during the audit and should be added to part 3A of the policy as a result of the audit. If you don’t complete you audit in a timely manner and forgot to notify your agent that you started work in another state then you may be left without any coverage in those states.
How much does Workers Compensation pay for injuries?
On your policy you will see Employer Liability limits typically for $100,000/$500,000/$100,000, $500,000/$500,000/$500,000 or $1,000,000/$1,000,000/$1,000,000. However, these are not your limits for injuries or illnesses sustained by an employee due to work related injuries. These have to do with claims such as cross-over action claims, dual capacity claims or lawsuits alleging employer negligence that resulted in an accident.
However, due to the way the Virginia Workers Compensation laws are structured, I’ve never personally even seen a claim come in that would be subject to these limits. The reason for that is in the state of Virginia, Workers Compensation is meant to be the sole remedy for the employee if they sustain an workplace injury. The unlikeliness of having to be subject to these limits is even further strengthened by the fact that most insurance companies will put a Commercial Umbrella Insurance policy over a Workers Compensation policy at no charge. However, if you do work in other states other than Virginia, then those limits may be a factor for you.
As far as paying for death benefits, lost wages and medical bills, Workers Compensation is unlimited. Whatever the cost is, the cost is. The insurance company could potentially pay out $10,000,000 if that is resulting claim amount.
Should I have a deductible on my Workers Compensation Insurance policy?
Unlike other states, Virginia is a gross reporting state when it comes to workers compensation claims. What that means is that the gross amount of your workers compensation claim will be reported to NCCI when they promulgate your Experience Mod instead of the net amount. For example, if you have a $5,000 deductible and the total of the claim was $4,000 so you paid that entire amount out of pocket, the entire $4,000 gets reported to NCCI when they promulgate your Experience Mod since Virginia is a gross reporting state. If Virginia was a net reporting state, $0 would be reported to NCCI. So having a deductible on your Workers Compensation policy from that perspective doesn’t make any sense because it will not have any effect on lowering your Experience Mod. However, having a deductible can save you money upfront on your Workers Compensation policy through that individual carrier and when your policy renews, that individual carrier may take into account the net paid amount of claims when determining any discretionary pricing. So from that perspective it may be beneficial for you to carry a deductible. Ultimately, the decision is up to you but I’ve found that for Workers Compensation policies in Virginia, unless the carrier is willing to make a major reduction in premium, that in the majority of cases it isn’t cost effective to have a deductible.
Who We Provide Workers Compensation Insurance To
Cothran Insurance has been providing Workers Compensation insurance to businesses since 1981 and we are licensed in Virginia, North Carolina, South Carolina, West Virginia, Texas and Florida. Workers Compensation is what sets our independent insurance agency apart from other independent insurance agents?
Call us today for a free workers compensation insurance quote.
Other Products and Services We Offer
· General Liability Insurance
· Property Insurance
· Commercial Auto Insurance
· Inland Marine Insurance
· Builders Risk Insurance
· Professional Liability Insurance
· Cyber Liability Insurance
· Commercial Umbrella Insurance
· Workers Compensation Insurance
· Crime Insurance
· Directors and Officers Insurance
· Employment Practices Liability Insurance
· Fiduciary Liability Insurance
· Liquor Liability Insurance
· Commercial Flood Insurance