25 Workers Comp Insurance Hacks: A Cheat Sheet for Small Businesses

Aug 5, 2022 | Business Insurance

Starting a business is never easy. There are many challenges you can encounter as an entrepreneur. First, getting the appropriate workers’ comp insurance coverage is one of the most common struggles of small business owners. In addition, for most business owners, finding the best workers’ comp coverage for small businesses seems to be next to impossible. 

Accidents are always there to happen. That’s why it is a legal requirement to carry workers’ comp insurance coverage. In addition, this insurance provides support for employees suffering from occupational accidents, illnesses, and death. Furthermore, workers’ compensation insurance will protect employers from liabilities and possible lawsuits. So, here’s a foolproof cheat sheet for small business owners in getting the best deal on workers’ comp insurance coverage.

25 Workers Comp Insurance Hacks for Small Businesses:

Understanding Workers Comp Insurance 

Workers’ compensation insurance coverage is designed to provide financial support and medical benefits to employees suffering from work-related sickness, injuries, or death. In addition, a good insight into how workers’ comp coverage works will help you understand your legal responsibilities and benefits as a business owner. Furthermore, workers’ compensation insurance benefits employers and employees.

Employee Benefits:

  • Medical treatment for occupational injuries and diseases.
  • Rehabilitative assistance for work-related injuries.
  • Replacement for lost wages
  • Disability benefits for employees who are unable to return to work.
  • Death benefits surviving family members in the event of the employee’s death.

Employer’s Benefits:

  • Protect your business from legal liabilities and possible lawsuits
  • Compliance with the State requirements

Compliance with the requirements of the State

All states, except Texas, follow the Workers’ Compensation Act law. It is designed to provide financial and medical protection for employees. Employers are legally required to provide compensation insurance coverage for their employees, in case of occupational health problems and accidents. In addition, employers who fail to comply with workers’ comp insurance requirements may face penalties and imprisonment.

Know the State Requirements for Workers Comp Insurance Coverage for Small Businesses

Workers comp insurance requirements vary by state. Also, every state aside from Texas follows specific workers comp requirements and penalties. Furthermore, the State of Colorado requires all business owners to carry workers’ comp insurance coverage. This law applies to all businesses regardless of the quantity and status of employment of their employees.

Any employed person, whether full-time, part-time or even family members are entitled to workers comp insurance coverage. On the other hand, exemptions to the rules are for independent contractors as they are not considered employees. Finally, check out the National Federation of Independent Business state-by-state comparison of workers comp laws to determine the specific workers comp requirements your business needs.

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Find a Workers Comp Expert

As workers’ compensation laws vary by state, it is important to work with a competent insurance broker. Then, the insurance agent should be knowledgeable about the workers’ compensation system in your state. Furthermore, workers’ compensation coverage is determined by annual payroll and class codes. In addition, getting the appropriate workers’ comp insurance coverage for your employees is a bit tedious. Also, it pays to have a reliable insurance agent who can properly classify your employees and get the best suitable insurance coverage for you. 

Determine Assigned Class Codes

Classification codes are a numeric system used to determine the specific classification of work according to the nature of the business. In addition, the National Council on Compensation Insurance uses approximately 800 classification codes for various businesses. Furthermore, insurance companies use these class codes to properly estimate workers’ comp rates for the applicable safety risk associated with the employee’s nature of work.

It is highly advised to work with a competent workers comp expert to accurately classify your small business. In addition, proper classification of your business can save you thousands of dollars in your annual work comp premium payment. Furthermore, job roles with significant safety risk exposure are naturally classified with higher premium rates.

Categorize Employees by Job Roles

It is essential to have an accurate classification of employees based on their job roles. Moreover, the safety risk associated with every job role is the basis of classification codes. Also, workers’ compensation rates vary according to classification codes. In the same way, to determine the accurate class codes, it is important to have the correct classification of your employees.

Workers’ insurance premium rates depend on the risk related to the job roles and the employee’s annual payroll. Furthermore, incorrect class codes can make you pay higher premium rates. That is why it is highly advised to have an organized draft of your employee’s job description. Also, this will help your insurance agent in properly classifying your employees. 

Payroll Record Keeping

Payroll is one of the tedious aspects of owning a business. Having organized bookkeeping records of your payroll is good for filing taxes as well as getting accurate workers’ comp rates.  As compensation rates are also based on the annual payroll of an employee, it is beneficial to regularly monitor your payroll. 

Workers’ compensation insurance has several payment plans. In addition, it could be annually, semi-annually, or quarterly. Also, a monthly report of payroll helps with accurate payment of workers comp insurance coverage. Furthermore, insurance companies charge an add-on cost to your annual premium rate if there’s a deficit in your payroll audit. Moreover, keeping tabs on your expenses is already hard, and you don’t want unexpected expenses towards the end of your business year.

In addition, most businesses have different types of employees. Also, it is advisable to adopt an effective payroll process for different types of employees for a more accurate estimation of insurance coverage. Then, always appraise the annual payroll based on your business’s current situation to prevent incorrect workers’ comp insurance rates. 

Why is insurance necessary? Due to the unexpected nature of life! Avoid being caught without defense. The moment has come to ensure your family’s safety. It’s time to consult an insurance professional.

Payroll processes for different types of employees:

  • Full-time
  • Part-time
  • Family members
  • Hourly Workers
  • Temporary Workers 

Keep Existing Policy Accessible

Workers’ comp coverage should be renewed annually. Also, it is better to have your policy in hand as it helps in faster renewals of coverage. Remember, accidents can happen anytime. In addition, an accident with lapsed workers comp coverage is like a nightmare for business owners. Moreover, workers’ compensation insurance is the employer’s protection from legal liabilities and expenses for any work-related illness and injuries your employees may suffer. Furthermore, lapsed insurance coverage, it poses you at risk of liability claims from your employees.

Avail Premium Credits

As workers comp coverage is based on employees’ annual payroll and classification codes, employers don’t have a say on which insurance coverage to get. In addition, the only thing employers can do to get the best possible premium rates is through discounts and credits. Also, businesses with strong safety and training programs and fewer accident claims often get discounts or credits.

Create a Safety Plan

A well-established safety plan can significantly lessen the risk of occupational health hazards and accidents. Furthermore, minimizing the risks of occupational injuries and illnesses can greatly reduce the costs of workers’ compensation coverage. Moreover, small businesses with effective workplace safety programs can usually avail of discounted workers comp insurance premium rates. 

A workplace safety plan should address the following:

  • Management Support
  • Employer Responsibilities
  • Employee Responsibilities
  • Employee Injury and Illness Reporting
  • Incident Reporting and Investigation
  • Hazard Identification and Evaluation
  • Job Hazard Analysis
  • Personal Protective Equipment and Tools (if applicable)
  • Hazard Prevention
  • Company Communication
  • Safety Training and Education Programs
  • Safety Program Evaluation
  • Record keeping

Annual Review of Audit and Payroll

The insurance company does an annual worker’s comp audit of your employee’s payroll. It is best to double-check the audit and check for discrepancies. It is also the time to review and update the changes in your company that can affect your workers’ compensation premium rates. Furthermore, changes in payroll, business model, size, or geographic location may affect your insurance coverage rates. Also, these changes should be discussed with your insurance agent to get the appropriate workers comp coverage for your employees.

Get the Best Insurance Company Suitable for your Business

Not all insurance company offers the insurance coverage your business needs while some insurance company specializes in specific business industries. To ensure appropriate and adequate insurance coverage, it is best to get insurance coverage from an insurance company that specializes in your business industries.

In addition, Investopedia gathered and rated the best insurance companies for various businesses. Also, criteria were based on customer feedback, coverage benefits, and rating from the credit rating agency A.M. Best. Furthermore, they released a list of the best insurance companies based on business industries. AmTrust Financial is the best insurance agency for retail businesses for the year 2021 and is one of the companies we represent

Cross-state Coverage Policies

Some businesses require employees to work in another state. Moreover, it is practical to get workers’ comp coverage from insurance companies that offer cross-state coverage policies. Also, this will ensure continuous protection and coverage for your out-of-state employees. In addition, it is more cost-effective and time-saving as you do not need to purchase a separate policy.  If your business is under a monopolistic state fund, a separate policy is required for your employees who work in multiple states. 

Flexible payment options

Insurance companies typically offer annual premium payments. Starting your own business may cause you to be financially stretched; making you incapable to pay for your annual workers’ comp insurance coverage. Some insurance companies like AmTrust Financial offer flexible payment options like pay-as-you-go. This payment option allows monthly payments for your workers’ comp insurance coverage. It also allows the combination of other insurance coverage for your employees.

Bundling Options Offered by the Insurance Company

Every business requires different insurance coverage. To fully protect your employees and business from various potential liability claims and financial losses, it is highly suggested to get additional insurance coverage. It is best to find a reliable insurance company that knows and understands what your business needs. Get the service of an insurance company that offers bundling options for the insurance coverage your business requires. Bundling different insurance coverage is often more cost-effective and time-saving.

Network of Healthcare Providers

The insurance company’s network of health providers should be considered when it comes to choosing the best insurance company that offers workers’ comp coverage. It is recommended to get an insurance company with a wide network of healthcare providers. It is extremely beneficial for your employees to have accessible healthcare providers in times of occupational accidents and sickness. 

Customer Feedback and Third-Party Reviews 

Searching for the best insurance company for your business could be a lengthy process. The financial capability of an insurance company is an important factor in choosing the best insurance carrier. Ratings from reputable financial rating agencies will give you a good insight into the insurance company’s financial capability. 

Another factor to look into when scouting for an insurance company is customer feedback and third-party rating. It is beneficial to check reviews from third-party financial rating agencies like A.M. Best and Moody. This will give you a good picture of the financial capability, services offered, and customer feedback of various insurance companies.

Employee Limit and Definition

Workers’ comp insurance coverage requirements vary by state. Every state has different requirements regarding employment status and quantity. In the State of Colorado, all employees must have workers comp coverage regardless of employment status and quantity. It is important to check the necessary state requirements where your business is located. To check workers’ comp insurance coverage requirements applicable to your business, you may check it on the National Federation of Independent Business. 

Experience Modification Rate (EMR)

Insurance companies use this factor in calculating the workers’ comp insurance rates. Experience Modification Rate is a method for estimating the number of claims a company had and their equivalent costs. Businesses with fewer accident claims usually get a lower Experience Modification Rate. If your company has a lower-than-average EMR, this can lower your annual workers’ comp premium rates. Investing in an effective safety program will greatly lessen your EMR, thus, reducing your annual premium payments.

Immediate Reporting of Accident and Injury

Proper and prompt reporting of work-related accidents and injuries is vital in workers’ comp insurance coverage. Even the smallest injury and accident must be immediately reported and medically treated to prevent further complications and denial of workers comp benefits. Discrepancy and failure to report occupational accidents and injuries could lead to a breach of contract. 

State Fund vs. Private Insurance Company

Business location plays a big part in the decision-making between private and state-fund insurance providers. Businesses located in Wyoming, Ohio, Washington, and North Dakota have monopolistic workers’ comp state funds. This means there is no option to choose between private and state-fund insurance providers. The rest of the states allow options to choose between the state fund and private carrier insurance company. 

Advantages of Private Insurance Company:

  • As there is lots of competition in the insurance market, insurance companies tend to give discounts and incentives.
  • Private insurance companies offer insurance coverage tailored to your business needs. 
  • Better coverage and customer service 
  • Offers cross-state coverage policies

            Advantages of Monopolistic State Fund:

  • Time-saving as you don’t need to scout for the best insurance companies.
  • They give workers’ comp insurance coverage to all businesses regardless of safety risk exposure.

Assigned Risk Pool 

Some businesses with high-risk exposure and frequent history of claims often get a hard time getting workers’ comp insurance from a private insurance company. To provide workers’ compensation coverage to these types of businesses, they are assigned to a risk pool. An insurance company that provides coverage to these assigned risk pool businesses often adds a surcharge over the average workers’ comp premium rates. 

In some cases, new businesses find it hard to get workers’ comp insurance coverage. That’s not because they belong to a high-risk group or have a large history of claims. It’s because there’s no available insurance company that offers workers’ comp coverage in your area. That’s why it is better to get the service of an independent insurance company like Advantage Insurance Solutions. AIS partners with various insurance companies in Colorado and throughout the United States. 

Businesses in the assigned risk pool due to frequent claims are recommended to create an effective safety program to minimize accidents and claims. Cutting down on claims can remove a business from the assigned risk pool.

Post-accident Investigation and Drug Testing

It is advisable especially for small businesses to create safety policies and procedures. One important safety procedure is conducting a post-accident investigation and drug testing. In this way, businesses can identify the cause of accidents and can formulate safety policies to prevent future recurrences and lessen accident claims. Fewer accident claims can give you discounted premium rates.

Additional Coverage

As we all know, workers’ comp insurance only covers employees who suffer from occupational injuries and sickness. To fully protect your small business, it is highly recommended to get additional insurance coverage. This additional insurance coverage will protect your business from costly damage expenses and legal claims.

Start with nothing less than the best to avoid wasting time and money. Advantage Insurance Solutions offers a quote.

Additional insurance coverage your business will benefit from:

  • Business Owners Policy (BOP) 

It includes three types of coverage that will aid in the protection of your small business. 

  • Business Property Coverage

Cover damages to buildings in cases of fire, theft, vandalism, and wind damage.

  • General Liability Coverage

Cover third-party liabilities like medical expenses for injured customers or visitors to your business. It also covers payment for legal costs in case of a lawsuit over an accident on your business premises.

  • Business Interruption Coverage

This covers the replacement of lost income if the business is affected by fire, theft, vandalism, and wind damage.

These cover liabilities resulting from damage to a person or business caused by errors and omissions. Businesses or professionals like real estate agents, investment advisors, architects, accountants, consultants, and software developers will greatly benefit from this insurance coverage.

  • Data Compromise Coverage

It covers business expenses resulting from a data breach. This insurance helps with reimbursement of expenses like legal fees, informational materials, and credit monitoring in case of a data breach.

It protects vehicles operating on behalf of your business. This insurance covers leased, company-owned, and personally-owned vehicles used on behalf of the company. It covers liability and damage expenses.

  • Outdoor Property Coverage

You also need to consider the protection of the outdoor area of your business. Take note of the possible accidents that can happen outside your property for which you may be legally held liable. This insurance will protect you from possible liabilities and lawsuits that may happen outdoors your business property.

  • Employment Practices Liability Coverage

This insurance coverage helps pay for legal expenses in case your business is sued by employees or contractors. 

Some of the Lawsuits Covered by Employment Practices Liability Coverage:
  • Wrongful Discharge
  • Sexual Intimidation
  • Retaliation
  • Discrimination
  • Breach of the Family and Medical Leave Act 

(*Coverage may vary so it would be best to check your policy or go over it with your insurance agent thoroughly)

  • Equipment Breakdown Coverage

This optional coverage will help you pay for the costs of repair and replacement of damaged equipment after a covered circumstance. Equipment breakdown that happens in mechanical breakdowns, motor burnouts, power surges, and short circuits is covered by this insurance coverage.

Get A Quote

Getting a quote from various insurance companies will allow you to analyze and compare present quotes, plans, and discounts they offer. This gives you a better chance of getting the best workers’ comp insurance coverage your company needs. It is advisable to give accurate information to get the most accurate insurance estimate.


These foolproof hacks will surely help your small business in getting the best possible workers comp coverage. A better understanding of how workers’ compensation insurance works can help you effectively manage risk factors that can contribute to your annual premium rates. Small businesses will save a lot of money by simply following these insurance hacks. Follow these game-changing tips to get discounts and better premium rates. 

Launching your own business is thrilling but state laws and requirements are not. You should understand that some rules and regulations come with opening a business. As a business owner, you have legal responsibilities to comply with state requirements. From registration to tax liabilities and employers’ laws, you are legally bound to follow these laws. Failure to comply with state requirements and laws could result in steep penalties and suspension.

It is important to make smart decisions early on in the business, this will give your business a better shot at success. Make a smart choice now and contact Advantage Insurance Solutions here in Denver, CO to get the best workers comp insurance coverage for your small businesses. AIS is an independent insurance company that partners with various insurance carriers. This ensures we provide quality, adequate, and appropriate protection for small business owners like you. Contact us for more queries and if you need a quote!

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