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Workers Comp insurance can be confusing and frustrating – and expensive! Hopefully this information below is helpful to you as you look for a policy.
In the construction industry, for example, you can assume that you will be responsible to pay the WC premium for anyone you “employ”. That includes an unlicensed subcontractor, a family member or a friend. Some insurance companies go so far as to charge you if your licensed subs don’t have their own WC policy (the reason for that is explained below).
Your WC cost is based on a certain WC rate per $100.00 of employee payroll. Most construction classes have an hourly wage threshold, meaning if you pay your employee more per hour, the insurance company assumes that employee is more experienced and therefore less of a risk to them – this means a lower WC rate for you. The wage thresholds range from about $24/hr to $33/hr, depending on the class code. Also, some trades have higher rates than others, for example, roofing contractors. The higher the possibility of injury, the higher the rates. Keep in mind there is no “general laborer” class code. If you aren’t classifying “general laborer” payroll into a certain trade class code, the insurance company will most likely charge you premium according to the “governing class code” rate for your business, which is usually the highest WC class code rate on the policy. For example, someone who sweeps up drywall dust could be put into the carpentry class code by an auditor if you report them as a “laborer”.
There are also better rates for those who have had prior WC coverage, sometimes that can be one year of coverage, sometimes three. Your best bet is to maintain WC coverage year after year and work hard at not having claims. Some WC companies won’t even quote your business unless you estimate an annual payroll over $25,000, other companies over $30,000, others over $100,000. These policies will offer you the best rates.
You can also take out a “ghost policy” without any employee payroll when you are required to have a policy to gain access to a jobsite.
As stated above, some WC companies will charge you premium if your subs don’t carry their own WC policy, even if they don’t have any employees. The reason is, subcontractors will go after your WC policy if they get hurt. The only recourse for your WC company to deny that claim is to require your subs take out a “ghost policy”, because on that policy they have the option to be “excluded” from coverage. If they choose to be excluded, your WC company can deny their injury claim stating they denied WC coverage for themselves on their own policy.