Construction workers regularly rank in the top 20 most dangerous jobs in America. Although not a scenario many remodeling business owners want to consider, obtaining a proper workers’ compensation policy can quite literally save a business owner from financial ruin in case of worker injury while on the job.
Every state has its own workers’ compensation law. Tom Messier, vice president of construction industry services at Mason & Mason Insurance Agency, Whitman, Mass., stresses the importance of working with someone who understands your state’s particular law. “You need to comply with the laws of the state you’re working in, not the laws of the state your office is in.”
A business owner is responsible for anybody on the jobsite who gets hurt; the owner needs to pay 100 percent of any incurred medical bills, plus lost wages. That coverage includes subcontractors, as well as direct employees. Every state has its own definition of “lost wages.” Some states will cover wages up to 67 percent of the gross wage because that 67 percent would be tax free, says Messier, while other states will pay 100 percent but have maximum weekly pay limits. “Every state has its own maximums, minimums and percentages,” Messier reiterates.
“There are 50 states; there are 50 laws,” he says. “You need to find someone who can give you real advice about workers’ comp in your state. You can find that person at a NARI or HBA meeting. There are insurance agents who work almost exclusively with contractors. Those are the people who will understand the business and industry.”
Messier himself is involved with the National Association of the Remodeling Industry and has been an officer of the Builders Association of Greater Boston. There have been times, Messier says, when his firm can save a client up to 30 to 50 percent on their policies compared to the policies they had with an insurance agent who didn’t understand the business and how to take advantage of the rules.
Be sure to factor workers’ compensation into budgets; as with other specifics, the cost varies per state. Messier says the rate in Massachusetts generally represents approximately 8 percent of payroll whereas its northern neighbor, New Hampshire, can have rates as much as 24 percent of the payroll.
There are ways to reduce rates, however. “Safety programs are huge and can lower rates,” Messier explains. “I have clients getting credits of 15 or 18 percent because they’ve been loss-free for several years. Being loss-free can save you a significant amount of money. Conversely, if you have losses, that will increase your rate. It can be a huge savings or debit in both directions.”
Every state does an experience modification rate (EMR) calculation on each employer. This number gauges the past cost of injuries and future chances of risk. The lower the EMR, the lower workers’ comp insurance premiums will be. With workers’ compensation, a company purchases whatever the statutory limits of the state dictate they must. “If I’m working in multiple states, then my policy has a rate for each state but it’s statutory,” Messier explains. “It’s whatever the law says I have to cover. That’s what we’d cover.” This purchasing is in contrast to general liability, where a contractor purchases a set amount — whether it be a half million dollars or $2 million.
Workers’ compensation and general liability policies are related, but Messier says they each have a number of exclusions. When both policies are together, however, they fit together like a zipper. “General liability covers bodily injury and property damage that is the result of your work, but will not cover bodily injury to employees or subcontractors,” he explains. “For example, if a neighbor comes over, trips on a ladder and breaks his leg, the general liability policy will respond. But if an employee does the same thing, general liability will not respond and workers’ comp will respond.”
To view the contact information for your state workers’ compensation official, visit: dol.gov/owcp/dfec/regs/compliance/wc.htm.
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