Workers’ compensation insurance for construction companies

In the construction industry, physical labor brings a high risk of injuries that could place a tremendous financial burden on your business. For instance, if a carpenter has an accident with a nail gun, it could lead to hefty medical bills and downtime.

Workers’ compensation insurance can pay for medical expenses when an employee is injured on the job or develops an occupational illness. Workers’ compensation benefits also cover part of the wages that are lost when an employee suffers a temporary or permanent disability.

Workers' comp is usually mandatory for employees, and subcontractors must often show proof of insurance to general contractors and project owners as well. Sole proprietors may also decide to buy this policy for financial protection against work injuries, which health insurance might not cover.

Here’s what a workers’ compensation insurance policy provides:

Every state has its own workers' compensation laws. For instance, every construction business in Pennsylvania is required to carry workers' compensation for its employees, including full-time, part-time, and seasonal workers. Businesses in Georgia, on the other hand, only need to carry workers' comp when they have three or more employees.

States often have stricter requirements for construction companies than other types of businesses due to the industry's increased risk of injury. Roofing contractors in particular are usually required to buy workers' comp coverage, regardless of whether or not they have employees.

Even when independent contractors, sole proprietors, and members of limited liability companies (LLCs) and partnerships qualify for an exemption, they can sometimes choose to purchase workers' compensation coverage for the financial protection it offers. However, exemption and opt-in rules vary by location.

In the four monopolistic states, construction and contracting businesses must purchase workers' comp coverage through the state fund. Those states are:

• North Dakota
• Ohio
• Washington
• Wyoming

If you purchase workers' comp through a monopolistic state fund, it won't include employer’s liability insurance. However, you can purchase it as stop gap coverage from a private insurance company.

The amount you pay for workers’ compensation insurance is a specific rate based on every $100 of your business’s payroll. Your premium is determined by the type of work done by your employees (classification rate), your experience modification rate (claims history), and your payroll (per $100).

The formula providers use in underwriting to calculate workers' comp rates is: Classification rate x Experience modification rate x (Annual payroll / $100).

Construction contractors and businesses face high risks due to the physical nature of the work – not to mention the hazards of saws, ladders, and heavy construction equipment. If an employee suffers an injury, it can lead to a costly workers' compensation claim – and a rise in your premium.

Fortunately, owners of construction companies can mitigate risks by implementing safety measures and reducing hazards in the workplace. For example, you can make sure your workers are equipped with protective gear, such as gloves and goggles. This can lower your rate of workplace injuries, along with your workers' compensation insurance rates.

Additionally, a pay-as-you-go workers' comp policy can reduce your upfront costs, with your premium adjusted throughout the year according to real-time payroll figures. This is ideal for businesses with tight cash flow or slow and busy seasons.

Insureon offers a one-stop shop for workers' comp and other types of construction insurance from the nation's leading providers. With our easy online application, you can compare quotes for policies that match your construction company's unique risks and requirements.

Our licensed agents will walk you through your options and help you find cost-saving packages. Once you find the right policy, you can begin coverage and get a certificate of insurance (COI) in less than 24 hours, so you can get protected and sign contracts right away.