Business changes that may require updates to your workers' compensation policy
To protect you properly, your insurance policies need to reflect the current state of your business. That fact won’t surprise most business owners or anyone who has insurance—business or personal. When what’s being insured changes, you (and your insurer) need to update your policy. That’s why it’s critical to stay in touch about your workers’ compensation coverage.
This article looks at the reasons you might need to update your workers’ compensation coverage. We’ll also address when and how changes are made. (Hint: The workers’ comp audit at the end of your policy period plays a key role.)
Let’s go!
“Has any information on our insurance application changed?”
The simplest way to remember what might require you to update your workers’ comp policy is to ask yourself: “Has any of the information on our workers’ comp insurance application changed?” It’s helpful to consider that question from time to time during your policy period, but it’s essential to answer it when providing information for your policy audit.
Here’s an example: You own a home services business that offers drywall repairs, minor renovations, and other odd jobs in and around the house. You’ve included all of those activities on your workers’ comp insurance application.
Then, you hire someone with rough carpentry framing experience and start offering that service. The new offering, which wasn’t included in your original insurance application, comes with different risks and a new class code (which affects how your coverage is priced), so you’ll need to let us know about the change. We’ll consider the information at the end of your policy period when we perform the workers’ comp audit.
At the time of the audit, we’ll also address other changes like increases or decreases to your workforce and update your policy as needed.
How workers’ comp protects businesses
Having workers’ compensation coverage and working with your insurer to keep your information current and accurate is important for multiple reasons. First, most states require companies that have employees to carry workers’ comp. If you don’t have a policy, your business can face fines, penalties, and even legal action in some cases, and no small business owner wants that! So, compliance is extremely important.
On the positive side, workers’ compensation coverage provides business owners, employees, and their families with tremendous peace of mind. It offers critical benefits if a worker gets hurt or sick at work, including payment for:
If an employee dies from a work-related incident, workers’ comp can provide benefits to their family members.
Why insurers perform workers’ compensation audits
We mentioned workers’ comp audits above, so you might wonder what that process is for and how it works. Let’s go a little deeper into that.
Insurers price workers’ compensation coverage based on multiple factors. Some of them, like company payroll and employee class codes as determined by job duties, can change (sometimes significantly) during the policy period. That’s why insurers perform a workers’ compensation audit at the end of the period.
Here’s an example: A few months after purchasing its workers’ comp policy, a company undergoes a major expansion, doubling its workforce. They also start offering a new service that has more risk than any of the work being done previously. That means the rate they paid for workers’ compensation coverage for most of the period probably wasn’t sufficient for the risk.
A workers’ comp audit identifies and corrects that issue. In this example, the company would owe the insurer money, but that’s not always the case. The reverse scenario could also be true. The business might stop performing the service with the higher risk and, as a result, significantly reduce its workforce. Then, the insurer would pay the business for the overage in premium.
Workers’ compensation audits are typically simple and straightforward.
It’s safe to say that nobody likes the sound of the word “audit.” People often associate it with a long, probably frustrating, potentially costly process. If that’s what you’re picturing, you’re not alone!
But the good news is that a workers’ comp audit is faster and easier than you might think. And when you purchase your workers’ compensation coverage from biBerk, we guide you every step of the way.
The process can vary somewhat, but in general, it goes like this:
- We request specific information from you.
- You provide the necessary documents.
- We review them and contact you if we need more details or clarification.
- We let you know the audit results and whether additional premium is required, a refund will be issued, or no money will change hands.
It’s really that simple, especially since you’re probably already tracking the necessary audit information for your own purposes. Plus, our team members are friendly, knowledgeable, and happy to answer any questions you have.
Get workers’ comp coverage from a trusted insurance partner.
Companies everywhere trust biBerk for their business insurance for many reasons, including that we’re part of the Berkshire Hathaway Insurance Group, with extensive experience, deep resources, and a reputation for outstanding service. More than an insurance provider, we’re an insurance partner to the small business owners who rely on us.
If you don’t have workers’ compensation insurance but need it, you can get an instant quote, purchase a policy, and manage it all online whenever it’s convenient for you.