How to Get Workers’ Comp Insurance: Tips for Businesses

Workers’ comp insurance is a requirement for most businesses within the United States. However, that doesn’t mean it’s always easy to get. Some business owners struggle to find carriers willing to offer a workers’ comp policy. If you’re frustrated about being declined by insurance company after insurance company, this guide will help you understand how to get workers’ comp insurance.

Do You Need Workers’ Comp Coverage?

Most states do require that businesses operating within their borders provide workers’ compensation insurance to employees. However, not all businesses face the same requirements in all states. Make sure that you’re required to have workers’ compensation insurance before doing anything else.

It's Not You, It’s Them

Before we explore how to get workers’ comp insurance, let’s discuss why you’re being declined all the time. In a nutshell, it’s not really about you. It’s about the insurance provider. Put simply, certain carriers have specific risk appetites and goals. If your business doesn’t fall within the narrow range, the company won’t issue a workers’ comp policy. It doesn’t mean that you’re not insurable, it just means that you’re not a good fit for that specific insurance provider.

So, what can you do? Anyone wondering how to get workers’ comp insurance for my business actually has three potential paths to take: the standard market, PEO, or a state fund. Let’s delve into each of those three to help you understand what’s what.

Standard Market

The standard market is what most business owners think of when they picture buying insurance. This usually involves working with a broker to shop around for workers’ comp coverage through various insurance companies. It also involves being declined, sometimes frequently. 

Again, this is more about the insurance company than it is your business. For example, one carrier might not insure painting companies, but they may make an exception for painters who specialize in interior rather than exterior painting. Or one carrier might insure landscapers, but not those who trim trees, while another insurance provider might have no problem with tree trimming.

The point is that each insurance company has its own underwriting guidelines. They pick and choose their customers based on those guidelines and their in-house risk appetite. Let’s go back to the tree trimming example briefly. One company might say “no” flat out, but another will say “yes”, provided the employees are harnessed and in a lift for jobs up to 200 feet and there’s no climbing over 30 feet. 

Here's another example. Some insurance companies will cover truckers if they are W2 employees and have a maximum driving radius of 500 miles with no hazardous materials delivered. Other insurance providers won’t insure anything with wheels. 

And a third example. When it comes to the cannabis industry, one insurance company may be happy to cover traditional brick-and-mortar dispensaries but is not okay with mobile dispensaries. Another company, however, might be fine with mobile dispensaries.

Everything is bound by underwriting guidelines and those guidelines can vary dramatically from one insurance company to another.  Don’t assume that you’re uninsurable, just ask your agent to continue shopping around.

An Important Note on Shopping Around

When it comes to how to get workers’ comp insurance, shopping around may be your only option. However, use caution here. Wise insurance buyers will ask their broker which companies they will approach. They will also provide the agent with the names of any insurance companies that have already declined to insure them. 

Always ask your agent which companies they approached so you can tell the next agent. If the same insurance company is approached by multiple brokers representing the same client, it’s a red flag and usually results in the broker being blocked. Worse, it hurts your chances with the carrier. 

When a carrier receives numerous submissions from multiple agents on behalf of the same client, they lose leverage. Why? The carrier sees that the incumbent agent doesn’t have full control of the policy – because another agent was able to convince the client to use them – so the underwriter realizes they might not win the contract. That sends it to the bottom of the pile. 

PEOs – Professional Employer Organizations

The second option is a PEO (toward). According to SHRM, “A professional employer organization is an organization that enters into a joint-employment relationship with an employer by leasing employees to the employer, thereby allowing the PEO to share and manage many employee-related responsibilities and liabilities.” 

This option enables employers to outsource their human resource functions, including tasks like managing employee benefits, handling compensation and payroll administration, addressing workers' compensation matters, and handling employment taxes. 

In this situation, your employees ultimately work not for you, but for the PEO. They’re leased back to your organization. This allows you to get around risk-related hurdles and may mean that you’ll be able to get workers’ comp insurance more easily.

Is going the PEO route right for you? There are pros and cons that you’ll need to understand. It’s also worth discussing your needs with your agent and getting their professional input.

Pros of Working with a PEO

Working with a PEO can offer quite a few advantages that enable small businesses to focus on core competencies and prepare for future growth. Those include:

• Having an experienced partner to handle benefits, payroll, and unemployment administration.
• Having a trusted partner to handle workers’ compensation administration, as well as FMLA administration.
• Help with recruiting, onboarding, and drug testing.
• Assistance with compliance-related issues.

Cons of Working with a PEO

While there are plenty of benefits to working with a PEO, there are some drawbacks, too, including the following:

• You will lose control over administrative processes.
• You lose control over essential people because they are technically employed by the PEO.
• The PEO’s culture will affect your company. 
• You may face some resistance from employees.
• You will have to outsource your payroll and pay for administrative services.

The bottom line? If you’re wondering how to get workers’ comp insurance, going the PEO route is worth considering. It’s not the right fit for all businesses all the time, but it can be a good option and a great way to get the coverage that you need.

State Funds

Your final option is a state fund. Many states have their own fund, which is also sometimes called an assigned risk pool. For instance, New York has NYSIF, New Jersey has NJCRIB, and Pennsylvania has SWIF. 

These pools are designed to help business owners get workers’ comp insurance when the business is simply too high risk for other insurance companies or has had too many workers’ comp claims for an insurance company to take them on. 

Note that some states require employers to buy workers’ comp insurance through the state fund rather than through an insurance company. These are called monopolistic state funds and you’ll find them in North Dakota, Ohio, Wyoming, and Washington. 

Other states, like California, operate competitive state funds and allow business owners to choose between their coverage or buying from an insurance company.

States with competitive funds include the following:

• Arizona
• California
• Colorado
• Kentucky
• Louisiana
• Maine
• Maryland
• Minnesota
• Missouri
• Montana
• New Mexico
• New York
• Oklahoma
• Oregon
• Pennsylvania
• Rhode Island
• Texas
• Utah

All state funds operate through a state/insurer partnership, although the insurance companies vary from state to state. Additionally, some states allow the NCCI to manage their funds. 

State funds offer several benefits for any business owner wondering how to get workers’ comp insurance for my business. These include the following:

• Not Risk Averse – State funds are well-suited for businesses in high-risk industries that cannot get workers’ compensation insurance from an insurance company. While the insurance coverage is still provided by a private company, these funds are specially designed for organizations that don’t fit the mold.

• Baby Step Toward Private Coverage – For some businesses, state funds provide a way to baby step toward coverage from a  insurance company. You can get a policy with the state and maintain it for several years to prove prior coverage and establish a track record of low or no claims and perhaps make your business a more attractive option for insurance companies.

Buying from the state fund might not be as simple as it seems, though. Some states will require that you prove that you applied for coverage with an insurance company but have been denied. Your agent should be able to provide you with that type of documentation, but it does require that you go through the process, which can be time-consuming.

Not sure if this is the right option for you? Choose your state to see who manages the state fund.

Navigating the Options: Choosing the best Workers' Comp Insurance Path for you

As you can see, there are multiple options for anyone wondering how to get workers’ comp insurance for their business. For many organizations, shopping around with insurance companies is the best option. However, if you’re part of a particularly high-risk industry, that might not yield the results that you need to comply with your state’s workers’ comp laws. In that case, you might decide to apply with the state fund (if applicable) or to work with a PEO. 

Ultimately, there is no one-size-fits-all approach that will work here. It hinges on your business, the risks posed by jobs/roles within your organization, and the underwriting guidelines that insurance companies must follow. 

In need of guidance to choose the best option for your workers' comp insurance? Our experienced representatives are here to assist you. Call us at 866-311-9548 and let us help navigate you toward the ideal solution for your business.