Workers Compensation Insurance in CA

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Workers compensation in California is a highly detailed and nuanced subject. As the regulations are very state-specific, it is important to understand what your obligations are in the state of California and how you can ensure compliance. As it would be impossible to explain every letter of the law in one post, we’ll look at some of the questions we most frequently come across.

As always, if you have any questions, do not hesitate to reach out for clarification.

What is workers compensation insurance?

Workers compensation insurance is a legally required form of commercial liability insurance where the employer assumes responsibility to pay costs and damages for injuries that happen on the job.

Workers compensation pays out benefits for injuries sustained on the job. Benefits can include payment of:

· Medical expenses
· Temporary disability
· Job displacement benefits
· Death benefits

Who needs to purchase workers compensation insurance?

In California, all employers are required to hold workers compensation insurance. This is mandated by the California Labor Code section 3700. If you employ one or more people, you must be covered under this law.

In some cases, the owner of the company or the executive board may not be covered as they are not technically “employees”. This usually happens when the board retains 100 percent ownership in the corporation. The option to include or exclude these individuals should be discussed with a qualified insurance broker. A sole proprietor is not generally included in workers compensation coverage, but they can elect to participate.

What is self-insurance?

Self-insurance allows the employer to pay their own workers compensation claims. Not every employer is eligible for this type of coverage. Additional coverage is often required in order to protect the employer from catastrophic loss or an unexpected frequency of claims.

An employer may choose to become self-insured if the following conditions exist:

· They have not had a lot of claims and feel they are paying too much for standard coverage
· They are not happy with how their claims are being handled and want to have more control over the process
· They want to have more control over money that isn’t immediately required to pay claims

Even though the company retains responsibility for handling claims, it is usually done by a third party claims administrator who specializes in loss control for self-insured clients.

Self-insurance is not for everybody. It is most appropriate for large companies with a stable history. A business who wants to self-insure must obtain a certificate from the California Department of Industrial Relations, following which they must post a security deposit in lieu of future claims.

How much does workers compensation insurance cost?

The short answer to this question is – it depends. The cost of workers comp coverage is calculated according to industry, job classification, and injury statistics related to that industry and job. The frequency of injuries is considered, as is the severity of injuries. For instance, roofers in California have the highest injury rating, while office clerks rank lowest. The higher the risk, the higher the cost of coverage.

What determines my workers compensation insurance premiums?
The base rate of coverage is calculated according to the rating for each industry and job classification. It starts with a per-employee dollar amount and is then multiplied as follows:

Premium = [Rating] x ((1%x$100)*(total payroll per employee))

For instance, a secretary is classified as an office clerk, for which the rating in California is approximately $1.25 per every $100. If that individual is paid $700 per week, the premium for that one employee would be .0125 x 700 = approximately $8.75 per week.

Additionally, there are factors that might affect that premium such as the employer’s safety history (the more claims, the higher the premium) and whether or not they offer health insurance to their employees. Providing health insurance to your workforce can significantly lower your workers compensation premiums.

How do I obtain workers compensation insurance?

Workers compensation insurance must be purchased through a broker who is licensed to sell workers comp, or through the State Fund. State Fund is a non-profit organization who competes with private insurers and is sometimes seen as a last resort for companies who are having trouble obtaining coverage through other insurers.

Do you have questions about workers compensation in California that were not addressed here? Call to learn more or request a quote today.