The Dangers of Online Workers’ Compensation Quotes

Dangers of Online Workers’ Compensation Quotes
Mordechai Kamenetsky
Last Updated: 
April 17, 2023

Workers’ compensation coverage is required for businesses with more than a certain number of employees. 

However, because businesses  compare quotes from different insurance companies, getting the right coverage can be a guessing game. 

Many business owners and decision-makers turn to the Internet for free, fast quotes, but that can be incredibly problematic, with many dangers that could come back to haunt you.

Of course, obtaining quotes the old-fashioned way is incredibly time-consuming and it’s entirely likely that you will miss opportunities for affordable coverage. Is there a middle ground? 

There is and, in this article, we’ll discuss the dangers of relying solely on online quotes and the right approach to ensure you get enough quotes to make an accurate comparison and find affordable coverage.

Table of Contents

The Dangers of Online Quotes

The dangers here are manifold. We’ve broken them down into several specific categories: inaccurate pricing, coverage, limits, and specifics that can harm your business. 

Wrong Classification

One of the most common dangers of relying on an online quote is getting the classification wrong. Many industries use multiple class codes. 

Not sure what that means? Class codes (or classification codes, if you prefer) are three- or four-digit codes insurers use to identify specific types of work. They’re used to help estimate risk and play a major factor in your worker’s compensation insurance costs. 

In most cases, higher risks equate to higher costs.

For example, a construction business would have higher rates than an outsourced accounting firm simply due to the increased risk of worker injury on the job. And there’s a different code for each industry. 

For instance, electricians have a different code from plumbers, and so on. You’ll also find that each state can have different codes for the same industries, and some states require you to get workers’ compensation through a state fund (Washington, Wyoming, Ohio, and North Dakota, for instance).

Obviously, you want the class codes to be as accurate as possible. 

Inaccurate codes could mean paying more for your policy, or it could mean underpaying for coverage, which might bite you when an employee needs that coverage. 

Looking up workers comp class codes

One thing that many business owners don’t understand is that even within specific industries, different codes can apply. For instance, flooring can have wood, tile, carpet, or vinyl. Getting more specific allows you to split payroll. 

In this instance, starting the process online allows you to begin dialing in your quote, but then working with an agent ensures you get the accuracy necessary.

Here's another example: some industries have different codes depending on the job environment. 

Take the janitorial industry as an example. It can be residential or commercial, and that makes an enormous difference in risk and policy costs. 

Landscaping is another good example. The risks faced by “mow and blow” employees versus those installing hardscaping and handling traditional landscaping projects like building retaining walls are drastically different.

Finally, not all employees within a business are covered by the same codes, and sometimes someone might be covered by one and not another. 

For instance, 8810 – clerical and 8742 – outside sales are two common codes that have lower and higher rates within the same business. 

A clerical role entails less risk than someone engaged in outside sales. 

The right split allows you to customize your costs while ensuring the right classification for everyone within the organization. 

Using Inaccurate Payroll

Your business’s payroll is the basis for your premium costs each year. Inaccuracies here could mean overpaying significantly. 

They could also mean underpaying but then finding that you don’t have the coverage you thought you did when it becomes necessary, and even having to pay an increased premium at audit.

Ultimately, your projected payroll determines the cost of your premium. It’s critical to use the most accurate projected payroll in a workers’ compensation policy quote, but online forms don’t often let you dial these in. 

Most of them give you a range, but even a few dollars one way or the other could mean a major difference in costs at the end of the year.

Another related risk here applies to business owners and executives. If the owner or executive officers are included in the workers’ comp policy, online quote systems often use the minimum payroll assigned. 

Be aware of this if you want to be included in the policy or if you decide to opt out (assuming you’re operating in a state that offers flexibility in this instance). Otherwise, the system will use the state minimum regardless of what the payroll to the owner is. 

how to divide owner payroll for workers compensation insurance

On the other hand, maybe the owner doesn’t want to be included. 

In that case, an exemption must be made, and this requires specific steps. The individual responsible for comparing workers’ compensation quotes will need to sign the exemption and send it in. 

Otherwise, the default is to include the owner. If that's not done midterm, it would be done at the audit. That could lead to nasty financial surprises. 

However, an agent can advise and educate you about this risk, ensuring you make the right choice and avoid those cost overruns.

Estimated payroll amounts must include all employees, including 1099/subcontractors (anyone who doesn’t provide actual certificates of insurance that can be kept on record). 

This is easy for business owners to miss. After all, subcontractors aren’t technically employees, but failing to include them in calculations could mean paying much more at audit. 

An agent is proactive here and will ask specifically about the expected payroll for any 1099ers. 

Certificates of Insurance and Service to the Policy

We’ve covered some major risks so far, but we’re far from done. We also need to discuss maintenance, certificates of insurance, and service to the policyholder. Let’s address each of those in order.

Certificates of Insurance

Certificates of Insurance

A workers’ compensation certificate of insurance (COI) acts as proof of coverage. It also summarizes your policy details.  Depending on your business, you may need to provide your COI to potential customers or clients. 

For instance, general contractors will need to provide their COI to potential customers to prove that if one of their crewmembers is injured on the job, the business’s insurance will cover it, rather than the customer’s homeowner’s policy. 

The COI must be accurate and requires specific language, which can be challenging with only a call center.

Service to the Policyholder

Service to the Policyholder

Finally, understand that getting help when you need it is very tough to do when you’re dealing with a call center. 

An agent is your personal representative – a direct, human connection who can answer questions, make changes, and offer up expert advice and guidance. Call center employees are usually not experts and can only answer basic questions. 

Moving Forward: Finding the Best Workers’ Compensation Policy for Your Business

Calling multiple agents can be time-consuming and frustrating. However, relying on Internet-based quotes and call centers can leave you facing major cost overruns at audit or going without the coverage you need. 

Dangers of Online Workers’ Compensation Quotes

Thankfully, there is a middle ground. Working with a company like Kickstand ensures you’re able to save time while also getting customized quotes and the personal assistance you need and deserve.

Kickstand allows you to begin your quote online – it’s a simple, fast, and accurate way to start gathering information. 

However, the next step is to work with an agent who can take that information, build on it by asking pertinent questions about your business, industry, and employees (including 1099ers), and then create an accurate policy that protects your employees, complies with state laws, and reduces your costs.

Workers’ compensation coverage is a requirement in most states. However, obtaining coverage can be challenging and may cost you more than you think. That’s particularly true if you rely on an online quote process to compare your options. 

Instead, working with an agent helps ensure that you’re able to dial in accurate coverage for your specific business, avoid common problems, and even reduce costs by splitting codes. 

Ultimately, it’s important to remember that there is no one-size-fits-all solution when it comes to workers’ compensation insurance. Your business is unique, and your policy should be, too.

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Note: The information provided in this blog is intended for general informational purposes only and is not a substitute for professional legal or insurance advice. Laws and regulations regarding workers' compensation insurance are complex and vary by state and by specific circumstances. Therefore, readers are encouraged to consult with a qualified legal or insurance professional to obtain advice with respect to any particular issue or problem they might have.

Mordechai Kamenetsky

Mordechai Kamenetsky, co-founder and lead agent of Kickstand, is recognized as an expert in workers' compensation. He is passionate about helping small businesses manage risks and lower their workers' comp costs. In his articles, he educates readers and clients on the intricacies of workers' comp insurance.

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