north-carolina-workers-compensation-insurance

The Ultimate Workers Compensation Insurance Guide

What Is Workers Compensation Insurance?

The Standard Workers Compensation Insurance actually is made up of TWO parts, Workers Compensation (Part One) and Employers Liability (Part Two).

The coverage is a form of no-fault insurance provided by the employer for the employee.

Workers Comp Insurance (Part One)

Part One of the policy covers the employer’s statutory liabilities under workers compensation laws.

The Policy pays for an employee’s medical costs, lost wages, permanent disability or death benefits that result from a workplace injury or illness.

Employers Liability (Part Two)

Part Two of the workers compensation policy provides protection to the employer for lawsuit(s) employees  may bring for work-related bodily injury or disease, other than liability imposed on the insured by a workers compensation law.

What Are The Standard Workers Comp Limits?

Part One (Workers Compensation) Limits

Unlike most types of insurance, there is not A LIMIT to how much the insurance carrier will pay for someone that has gone “on claim” under Part One of the policy.  Instead, the Insurance Carrier will pay actual costs incurred (or via settlement) by the employee for the following:

  • Medical Bills
  • Rehabilitation Costs
  • Lost Wages
  • In Case Of Disability;Compensation for past, present and future economic loss

If an employee were to die, the insurance carrier would pay the employee’s family (or heirs) for the following:

  • Funeral costs
  • Legal fees
  • Death Benefits

Part Two (Employer Liability) Limits

Unlike Part One (unlimited limits), Employer Liability Limits have three parts that includes 3 seperate limits.

Bodily Injury (Per Occurrence)

Statuatory Limit: $100,000

Increased Limit (Option 1): $500,000

Increased Limit (Option 2): $1,000,000

Bodily Injury By Disease (Per Occurrence)

Statuatory Limit: $100,000

Increased Limit (Option 1): $500,000

Increased Limit (Option 2): $1,000,000

Bodily Injury By Disease (Policy Limit)

Statuatory Limit: $500,000

Increased Limit (Option 1): $500,000

Increased Limit (Option 2): $1,000,000

How Much Does Workers Comp Cost?

What Is The Minimum Premium?

There is no “SET” Minimum Premium for Workers Compensation Insurance.

Depending upon what the primary operation of the business, a Minimum Premium for a business could range anywhere from $600 to $1,500 a year.

How Are Workers Compensation Insurance Premiums Calculated?

Insurance Premiums are calculated using the following components:

  • Class Code Payroll
  • Experience Modification Factor
  • Employer Liability Increased Limit Factor (optional)
Class Code Payroll

Every business (and job within a business) must be catagorized by what the job function actually is.  That catagorization is known as a “Class Code” for Workers Compensation purposes.

Each Class Code has an associated cost per $100 of payroll.

From a Risk Perspective the person that works in the office performing clerical duties (Class Code 8810) has less risk of loss than the Roofing Contractor (Class Code 5551), and so the Rate for Clerical Staff would be less than $1.00 per hundred of payroll while a Roofer would be in excess of $20 per hundred of payroll.

Experience Modification Factor

Rate Modifications are determined by the North Carolina Rate Bureau and can provide either a discount or a debit to the stated Workers Compensation Rate for a policy.

Rate Modifications are based on the insured’s claims experience.

The BASE Rate Modification is 1.00 for all companies.

In order to qualify for a Rate Modification (effective January 1st, 2007) the insured must have a premium of at least $8,000 for the previous policy period.  If more than two years of data is used, an average annual premium of at least $4,000 is required.

Employer Liability Increased Limit Factor (optional)

The Class Code derived base rate calculates the Premium for the Standard / Statuatory Limits Of Liability for Part Two Limits.

In cases where a company requires optional increased limits of liability, the Insurance Carrier has a set factor they add to a policy’s premiums calculation.

Premium Calculation Formula

BASE RATE: Class Code Rate x (Payroll/$100)

  • Increased Limits Factor = Base Rate x Factor

EQUALS: Total Subject Premium

TOTAL MODIFIED PREMIUM: Total Subject Premium x Experience Modification Factor

  • Expense Constant (typically $160 to $200)

EQUALS: Estimated Annual Premium

Do I Need Workers Compensation Insurance?

  • Do I NEED Workers Comp?
  • Am I REQUIRED to have Workman’s Comp?

These are two entirely different questions.

Do I Need Workers Comp?

The simple answer is that if you own a business and have at least one employee, then you should purchase workers compensation insurance.

This coverage can protect your employees in case they are injured on the job and can protect your business in case your employee sues you for Bodily Injury.

Am I Required To Have Workman’s Compensation Insurance?

The North Carolina Workers Compensation Act  states that businesses are required to carry Workers Compensation Insurance if the business  has 3 or more employees.

For calculating “Employees” keep these scenarios in mind:

  • Individuals who are sole proprietors, members of LLCs, and partners are not automatically counted as employees
  • Corporate officers may elect to be excluded from coverage but are still counted in determining whether a business has three or more employees
  • Executive officers, directors, or committee members of a non-profit corporation are also not automatically counted as employees so long as they meet certain requirements under the North Carolina General Statutes