Accidents can happen in any work environment, regardless of how careful employees are. No matter what kind of business you run, you need workers’ compensation insurance. Many business owners choose a traditional policy, but some may benefit from a pay-as-you-go option.
All workers’ comp policies are designed to protect employees who are injured or contract an illness on the job. Your policy likely covers lost wages and medical bills. It may even include some benefits for survivors if the accident causes the employee’s death. Premiums are calculated based on four main factors:
- Business classification code
- Number of employees
- Total payroll
- Claims history
Traditional vs. Pay-As-You-Go
With traditional policies, the premium is typically based on an estimate of the number of employees and projected payroll expenses. Premiums are calculated and paid upfront for the whole term. A pay-as-you-go workers’ compensation policy may be more cost-effective if you have high turnover or your payroll varies from month to month. Each month is calculated based on your actual payroll totals rather than an estimate. Your premium reflects your workforce more accurately.
Even if your business is classified as a low safety risk, you still need a solid workers’ compensation policy to protect your employees. Whether you choose a traditional or pay-as-you-go policy, it is a necessary expense to add to the budget.