How To Buy Work Comp Insurance - Start-ups

This article is geared to small businesses and start-ups without workers' compensation insurance. I hope provide information that will help you find the right provider and the right coverage.

Your best bet is to start with an insurance agent that you already know. Hopefully your business has other insurance policies. Use the same agent.

If you're not buying business insurance at this time, you should. Property and liability coverage is an important part of your financial plan.

Finding an agent involves talking with friends and acquaintances who are in business. Find out who their insurance agent is. You can also talk with local chambers of commerce or trade associations for referrals.

Once you find an agent, she will review with you the information they need to provide a proposal of insurance.

For workers' compensation, the first step is to classify your business according to the type of exposure that you present to employee injuries. For example, construction, retail, small office, manufacturing.

There are over 900 different employment classifications in the workers compensation system. Your agent will find the appropriate classification for your company.

Your classification determines your premium rate per $100 of payroll. The higher your exposure is to an employee injury, the higher your premium will be. Construction workers carry a higher rate than office workers.

The policy term will be one year. Your initial premium will be based on your estimated payrolls for 12 months. At the end of the policy period the insurance company will audit your financial records to determine your final premium, based on actual payroll.

Most insurance companies will allow you to pay a premium in three or four installments over the year. This should help your cash flow.

Ask your agent to provide you with proposals from several different insurance companies. In some states, there is a competitive marketplace for workers compensation insurance. However, if you've been operating your business without workers compensation insurance, you may not be able to be choosy over which insurance company will provide you with coverage. You have probably been violating your state law by having employees without insurance.