Here is the story of a contracting business that recently called us after receiving a $13,000 worker’s comp audit bill in the mail.
This story should warn about what can happen when businesses try to DIY (Do-It-Yourself) their worker’s compensation insurance.
Watch below or keep reading…
Need Workers Comp Insurance?
Reducing Your Insurance Premiums Is Only The Beginning
Our proprietary, RogueRisk365® program allows you to “Win” the insurance game.
By focusing not just on reducing insurance premiums but Total Cost of Risk, our clients create a sustainable safety culture that cuts costs and frees up cash flow that belongs in their bank account, not with an insurance company. Here are a few of our services:
- Experience Mod Audit
- Market Analysis & Placement
- Premium Audit Review
- 24/7 HR Hotline
- Handbook & Document Building
- e-Learning Platform
- 24/7 Injury Nurse Triage Hotline
The Wrong Way to Purchase Worker’s Comp
In the case of this business, they made a classic mistake.
The business is owned and operated by a husband and wife. The wife owned the business 100 percent but wasn’t overly involved in the business operation.
The husband, on the other hand, was the president and primary driver of the business.
In setting up the worker’s comp insurance, they excluded the wife from coverage, which means they would not pay premiums on the small salary she took for office and clerical work.
They then correctly listed the worker’s comp class code and remuneration for their two employees who did the physical labor of the job and purchased the policy.
At face value, this is all correct.
The mistake that cost them over $13,000 at audit time was not listing the husband on the policy.
Because the husband didn’t take a direct salary and didn’t engage in the “main” operations (his words) of the business, he didn’t believe that he needed to be part of the worker’s comp policy.
This is not correct.
The husband is technically not an owner, so he cannot exclude himself or any remuneration he receives, whether it’s a direct salary or not.
Additionally, because they were not keeping detailed payroll records, the husband was charged an insurance premium against the average salary of a company's president similar in size and operations at the most expensive class code.
Download our free eBook: 5 Reasons To Get An Experience Modification Audit
Get a FREE Experience Mod Audit
We specialize in helping businesses take control of their worker’s compensation insurance by reducing their experience mod. Our proprietary RogueRisk365 program is the answer, and it starts with a FREE experience mod audit and review.
The solution is to work with a worker’s compensation specialist when setting up your policy.
In the case of this company, we advised this company on a couple of different options:
- Moving forward, the husband could take an ownership stake in the business. He then could exclude himself from coverage moving forward.
- Keep proper payroll records and add the husband to the policy to pay accurate premiums against his remuneration over the next policy period.
Unfortunately, there is no course of action NOT to pay the large audit bill this year.
As outlined above, a simple error in setting up your policy can have huge ramifications.
No one wants to receive a large premium audit bill at the end of the year.
This is where we come in at Rogue Risk.
We’re workers' compensation specialists who can help you navigate the market and workforce changes to ensure coverage without being overcharged.
You can start with a free Workers Comp Experience Mod Audit or use the options below to get a quote today!
- You can call or text us at 518.960.6600
- Click here to contact us via email.
I'm excited to introduce you to a new way of viewing your insurance program.