As a small business owner, you hear about all kinds of insurance you should have. One of the most important is workers’ compensation. Here’s why.
If an accident happens, it takes care of your staff.
Workers’ compensation ensures employees who suffer job-related injuries and illnesses get the medical care they need—as well as wage replacement while they’re unable to work. It kicks in regardless of who’s at fault—whether it’s an employee, the employer, co-workers, or customers.
It limits your liability.
Though it’s not mandatory for employers in Texas, you are required to take reasonable care to make sure your workspaces are safe. Accidents happen; and should an injured employee file a negligence suit, employers that don’t carry workers’ comp lose certain common-law defenses.
Failure to meet your workers’ compensation requirement can leave your business exposed to both full costs of workers’ compensation claims (through litigation) and additional regulatory penalties levied by the states, which can be severe.
In exchange for the guaranteed benefits workers’ comp insurance provides, employees have limited rights to sue the employer for damages for those injuries.
How premiums are set
Premiums are calculated according to:
- Payroll
- Employee classification (e.g. exempt, non-exempt), and the rate assigned to each classification.
- Experience Modifier This is an adjustment to an employer’s premium based on the losses the insurer experienced from that employer. I.e., if you had losses, they charge more than if you haven’t.
The formula for determining the premium is:
Premium=Payroll (per $100) x Classification Rate x Experience Modifier
The premium rate is expressed as dollars and cents per $100 dollars of payroll (for each class code).