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Cheap Labor

How to get a lower workers' comp premium

If the law says you need workers' comp insurance--and in most states, it does if you have three or more employees--you may think you're stuck with the premium you're quoted. Not so. Some creativity and attention to detail can mean plenty of savings. Jim Royles, director of workers' compensation product management at insurance and financial services company The Hartford, offers these tips:

$ Classify employees correctly. Your policy shows classifications, job descriptions and estimated payroll. Review it for accuracy, and contact your agent or carrier with questions.

$ Consider a deductible. Typically, workers' comp covers from first dollar, but Royles says about 75 percent of states allow deductibles, which earn you premium credits. Consider your claims history and the amount of the credit when making your decision.

$ Drop your own coverage. Many states let owners or corporate officers take themselves out of the workers' comp policy. That could lower costs, but would also mean you wouldn't be covered for an on-the-job injury.

$ Ask about merit rating credits. In many states, smaller businesses that typically pay $5,000 in premiums or less may be entitled to a credit of 5 to 15 percent if they have not had any lost-time claims during a period designated by the carrier.

$ Start safety and drug-free workplace programs. These programs may qualify for premium credits.

$ Keep accurate payroll records. Insurance carriers deduct "excludable compensation" (such as the difference between base and overtime pay, tips and some other forms of compensation) from your payroll to determine your premium, so keep detailed records.

$ Shop around. Royles says there was a time when all carriers charged the same rates, but those days are gone.

Jacquelyn Lynn is a freelance business writer in Orlando, Florida.

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This article was originally published in the March 2002 print edition of Entrepreneur with the headline: Cheap Labor.

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