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Monthly Archives

March 2010

LEAVE NO MARGIN FOR ERROR IN DESIGNATING LIFE INSURANCE BENEFICIARIES

By Life and Health

Many people purchase Life insurance, but fail in the critical step of selecting their beneficiaries properly. This article provides useful information on designating beneficiaries.

You are free to name just about anyone as your beneficiary. For most people it’s usually a close family member. However, you can choose any competent person or even an entity, such as a charity. Beneficiary designations can be made by naming specific people or entities; or they can be made by class, for example, my children.�

Naming individual beneficiaries is usually simple. Make sure to use full names to avoid confusion. You can be more specific by referring to birth dates or social security numbers. Designating classes can be more challenging. For instance, the designation “my children”� might lead to controversy over whether stepchildren are included. Be specific with class designations.

You can name multiple beneficiaries to receive equal or unequal shares. For multiple beneficiaries, use percentages or some other method of division not based on actual dollar amounts. For example, you can specify division in equal shares.� Dollar amounts often become outdated due to policy loans or changing cash values. You can also choose a trust as beneficiary. This can be useful in benefiting minors or disabled persons. Your primary beneficiary will always receive policy proceeds first. If this is a person, he or she must be alive when you die. If that named beneficiary is deceased, the policy proceeds go to your contingent beneficiary.

Therefore, it is important to name a contingent beneficiary. If you and your primary beneficiary pass away at the same time, your primary beneficiary is presumed to have died first. As a result, if there were no contingency plan, you wouldn’t have a named beneficiary. The policy proceeds would go to your estate. Having a named beneficiary avoids having your Life insurance benefits pass through your estate. This can save potential estate taxes as well as probate costs.

Sometimes naming a minor as a beneficiary is a bad idea. Insurance companies normally won’t make payments to them. Instead, consider a trust for the minor’s benefit. Also, most states have passed some form of the Uniform Transfers to Minors Act (UTMA). Under UTMA, through a proper designation, you can transfer your Life insurance proceeds to a custodian for the benefit of minor beneficiaries.

Be sure to review your beneficiary designations on a regular basis and make any revisions necessitated by marriages, divorces, births, and deaths.

It is important to focus on two main goals in choosing beneficiaries: Make sure your designations fulfill your goals, and avoid needless legal controversies. Consult one of our financial planners for more information

FOR SPECIFIC EXPENSES, TAP YOUR IRA EARLY AND PENALTY-FREE

By Life and Health

As the prevalence of employer-based pension plans has declined, personal savings has become critical to achieving financial independence in retirement. For many people, individual retirement accounts (IRAs) are their primary retirement savings tool. Traditional IRAs offer tremendous savings advantages, since contributions are tax-deductible and accounts grow tax-deferred, with regular income tax due on withdrawals made after age 59 1/2. But, sometimes, financial circumstances arise that require use of IRA funds before that time. Though a 10% early withdrawal penalty generally applies to funds withdrawn from an IRA before age 59 1/2, for certain limited reasons you can tap your IRA early and not be subject to this penalty.

Remember that regular income taxes still apply to these withdrawals, though the 10% early withdrawal penalty will not:

  • Education expenses: This includes the cost of college tuition, fees, books, and supplies for the IRA owner, or for a spouse, children, or grandchildren. If the student is enrolled at least half-time, the exception also applies to room and board. The school must be a college, university, or vocational school that qualifies for federal financial aid.
  • First-time home purchases: You can withdraw up to $10,000 penalty-free from your IRA for a first-time home purchase ($20,000 for spouses when both are first-time buyers). The money may be used to purchase a home for the IRA holder and spouse, or for a child, grandchild, or parent. First-time home buyers are defined as those who haven’t owned a home for two years. This particular early use of IRA money can be advantageous, if used to make a larger down payment that results in a lower mortgage interest rate.
  • Medical expenses: If you incur large medical expenses during the year, you can tap your IRA penalty-free to pay for them. The exception applies only to expenses that exceed 7.5% of adjusted gross income.
  • Health insurance premiums: The exception to the penalty also applies to Health insurance premiums, but only if you’ve lost your job and have been collecting unemployment compensation for 12 consecutive weeks.
  • Permanent disability: IRA owners who become permanently disabled before age 59 1/2 can take penalty-free distributions from an IRA.
  • Annuity payments: If you annuitize all or part of an IRA over your lifetime, and take a series of payments for at least five years or until age 59 1/2 (whichever is longer), the payments will be penalty-free. However, if you find you no longer need the money before the payout period ends, you cannot stop the distributions without jeopardizing their penalty-free status. Consult with a tax professional if you’re considering using this somewhat complex option.

Of course, if you use your IRA funds early, they won’t be there for you in retirement, and tapping this nest egg even partially can impact future account growth significantly. Consequently, most financial experts advise using an IRA for non-retirement expenses only as a last resort. Explore other cash sources first, such as loans or a home equity line of credit. This money can be replaced as it is paid back.

If your financial need stems in part from a cash flow problem, you also can consider making an IRA withdrawal but then reinvesting the funds in another IRA within 60 days. The IRS will view such a transaction as a rollover, and the amount returned to IRA status will be both tax- and penalty-free. You can use this strategy only once in a 12-month period for any one IRA.

EARTHQUAKE PROTECTION – NOT JUST FOR CALIFORNIANS

By Personal Perspective

When the threat of earthquakes arises, most Americans think only about California, or more recently, Haiti. For many years, the San Andreas Fault Line has been the recipient of much of the press concerning earthquakes in the U.S. Furthermore, predictions concerning the ultimate cataclysm believed by many to be centered there have given it a mythical stature unrivalled by fault lines elsewhere in the country.

Despite all the focus on the San Andreas Fault, California does not have a monopoly on earthquakes. The New Madrid Fault Line, centered in Missouri, has been cited by the U.S. Geological Survey as being a potential source of a significant earthquake threat. The USGS also notes that earthquakes in the central and eastern parts of the country usually have a broader range than their western counterparts. One such earthquake along the New Madrid Fault Line in 1811 rang church bells as far away as Boston, Massachusetts, about 1,000 miles away from the epicenter! More recently, in April 2003, a quake measuring 4.9 on the Richter Scale hit Alabama. A year earlier, a slightly more powerful quake hit Plattsburgh, NY. In January 2002, a 5.0 quake hit Evansville, Indiana. These quakes all shook neighboring states and caused significant damage to businesses, homes, and infrastructure in and around their epicenters.

Although none of these quakes equaled the intensity and resulting damage caused by the Northridge Earthquake of 1994, they do serve to support the idea that it might be wise to consider adding Earthquake coverage to your property policy even if you are not located in close proximity to a known fault line.

Since Earthquake insurance is generally an elective coverage, it might prove to be beneficial to do a quick review to determine whether or not it is a covered peril. Also, look at any scheduled property endorsements or personal property floaters to see if specific items are covered for earthquake-related damage regardless of whether or not the earthquake coverage endorsement has been purchased. If the answer is no� to any of these questions and you would like to obtain a quote, contact our office for details.

ON DEADLIEST DRIVING DAYS, USE EXTRA CAUTION

By Personal Perspective

With more than 34,000 car crash fatalities in the U.S. annually, there’s no question that driving can be dangerous any day of the year. However, research shows that holidays are often the deadliest days to be behind the wheel.

Turkey Day = High-Risk Roads

It turns out that Thanksgiving Day is the most lethal driving holiday. As a matter of fact, 502 people died in car accidents on Thanksgiving Day in 2008 — that’s a whopping 400 more car-related deaths than a typical day. The vast majority of these fatal car crashes occurred at night.

Believe it or not, that number is down from previous Thanksgivings. The DOT started tracking traffic fatalities in 1982, and the 26-year average of Thanksgiving Day deaths had been 556. Some experts say fatalities dropped partly because sky-high gas prices kept many drivers off the road.

It’s no wonder why Thanksgiving ranks as the most fatal driving day. According to the National Safety Administration, Thanksgiving weekend is the most traveled holiday period of the year, and nearly 90% of Turkey Day trekkers travel by car. Although the DOT has not yet released 2009 Thanksgiving stats, some experts predicted fatalities would be higher because lower gas prices would lead to more drivers on the road.

Eat, drink, and be merry — but don’t drive

One reason holiday driving is so hazardous is because many drivers enjoy a few too many festive drinks before they hit the road on these special days. Based on National Highway Traffic Safety Administration statistics, nearly half of all traffic fatalities on New Year’s Day are alcohol-related — the highest number of any holiday.

Other hazardous holidays

Based on DOT research, the following are the top five most dangerous holidays for drivers heading out the highway:

No. 1: Thanksgiving Day
Number of Fatalities in 2008: 502
Average Number of Annual Fatalities since 1982: 567

No. 2: Labor Day
Number of Fatalities in 2008: 487
Average Number of Annual Fatalities since 1982: 544

No. 3: July 4th
Number of Fatalities in 2008: 491
Average Number of Annual Fatalities since 1982: 542

No. 4: Memorial Day
Number of Fatalities in 2008: 425
Average Number of Annual Fatalities since 1982: 508

No. 5: Christmas Day
Number of Fatalities in 2008: 420
Average Number of Annual Fatalities since 1982: 414

Buckle up

If you’re planning to hit the road on one of these holidays (or any other day) be sure to buckle up. According to The National Safety Commission, more than two-thirds (67%) of car occupants who died on Thanksgiving 2008 were not wearing their seat belts.

Many states have more stringent seat belt laws these days for this very reason. In most states, law enforcement officers can pull you over and cite you simply for not wearing a seat belt regardless of whether you’ve broken any other traffic laws. In recent years, the National Highway Safety Administration (NHTSA) has sponsored a nationwide “Click-It-Or-Ticket”� campaign on Thanksgiving weekend. This is all the more reason to stay buckled up on holidays, and every other day.

Slow down

Another thing you can do to protect yourself on the road is to watch your speed. Speeding is one of the most common causes of traffic crashes. That’s because when you speed, you have less time to react to an emergency on the road. Plus, high speeds increase the crash force of a collision.

Although you should remain vigilant on these high-traffic holidays, it’s important to buckle up, watch your speed, and keep your eyes on the road every time you get behind the wheel. After all, holidays aren’t the only days when car crashes occur. So, drive safely, on holidays and every day.

CONSIDER THESE FACTORS REGARDING UMBRELLA INSURANCE

By Personal Perspective

Standard Auto, Homeowners and Boat insurance policies cover liability a person might have for injuries or property damage suffered by someone else. Insurance companies design them to cover accidents for which the insured person might owe tens or even hundreds of thousands of dollars. However, sometimes the person might be responsible for an accident so catastrophic that the damages are $1 million or more. To cover financially devastating events such as these, insurance companies offer Personal Umbrella policies. These policies provide additional protection when an accident uses up the amounts of insurance provided by the other policies. They might also cover some types of losses these other policies do not cover.

There is not a “standard”� Umbrella policy; each company’s offering will be different. Therefore, it helps to have a checklist of considerations when evaluating a policy.

First, identify those things that could expose you to a catastrophic loss. How many cars do you own? Do you have inexperienced drivers in your household? Household attractions like swimming pools, trampolines, and swing-sets present an exposure to severe losses. Boats, like cars, can cause serious injuries and damage if the operators are inattentive, intoxicated, or inexperienced.

Next, identify other exposures you might have that do not involve potential physical injury or illness or property damage or that might require different coverage. Do you or any members of your family participate in social media Web sites or online discussion forums? Does anyone coach a youth sports team, belong to the governing board of a non-profit organization, write computer code as a hobby, or give music lessons? These activities present different exposures to legal liability.

Review your insurance policies. How much will your Auto insurance pay for injuries to one other person? How much will it pay collectively for injuries to more than one? How much will it pay for property damage? How much will your Homeowners policy pay for your personal liability for an accident? Does it cover any business activities? Does it cover family members accused of slander, libel, or defamation of character in online postings? Does it cover you for allegedly causing mental anguish to a kid who didn’t get much playing time on a team you coached, or trouble caused by a computer program you wrote? How much will your Boat policy pay for your liability for boating accidents? The answers to these questions will tell you where an Umbrella policy can help.

For example, if your Auto policy will pay up to $250,000 for injuries to one person and $500,000 for injuries to multiple people, an Umbrella with a $1 million limit will give you insurance equaling $1.5 million for injuries to two or more people. If your Homeowners policy will pay up to $300,000 for your liability, the same Umbrella will afford $1.3 million if someone gets seriously hurt at your home. The Umbrella limit of insurance also applies on top of the limit on the Boat policy.

In addition, the Umbrella might cover such things as volunteer activities, statements made online, and certain business activities that a Homeowners or Auto policy might not cover. Normally, the insurance company will require you to pay a deductible amount (such as $250 or $500) before it will pay for a loss that one of these other policies does not cover.

One of our professional insurance agents can help you sort out what your current insurance does and does not cover and what additional coverages an Umbrella will provide. It is important to compare all the coverages the policies provide and not just their prices. Fortunately, catastrophic accidents are extremely rare, but having an Umbrella policy when they happen can make it easier to get through them.

RECEIVED A RESERVATION OF RIGHTS LETTER? DON’T BE ALARMED

By Business Protection Bulletin

A university hires an architect and general contractor for a multi-million dollar project involving the erection of a new state-of-the-art building containing multimedia-capable lecture halls. After three years of planning and construction, the university unveils the new facility to great fanfare. Within a few months, however, problems start to arise. Rain and melting snow fail to drain properly. Water seeps in through new cracks in the masonry walls. Mold forms on walls and ceilings, spoiling the appearance and causing allergic reactions among students and staff. Investigators for the university conclude that the building has significant design and construction flaws. As a result, the university files a number of lawsuits against the architect and the contractors who performed the work, alleging that their incompetence caused the problems.

The architectural firm notifies its Professional Liability insurance company of the allegations. Within a few weeks, the firm receives a letter from the insurance company stating that the company is reserving its rights to deny parts or all of the claim, pending its own investigation. The architect, already faced with a hit to its reputation and a potential loss of business because of the suit, reacts badly to the letter. The chief partner calls the firm’s insurance broker and demands to know why he has received this threatening letter after he has paid thousands of dollars in premiums for the insurance policy. The broker explains that the letter, known as a “reservation of rights letter,”� is a normal part of the insurance claims process. Not entirely reassured, the partner wants to know what the letter is all about.

A reservation of rights letter is a notice which states that, while the insurance company is handling the claim, the insurance policy might not cover the claim entirely. In the early stages of the claim process, the company has limited information about what happened. It could take time for the company to investigate and gather all the facts. However, many states have laws requiring insurance companies to notify clients and claimants promptly that coverage might not apply. By giving the insured an early notice, the reservation of rights letter preserves the company’s legal ability to deny some or all of the claim at a later date.

Insurance companies may deny claims for several reasons, such as:

The policy excludes coverage for the activity or event in question. For example, if the company’s investigation reveals that one of the firm’s architects intentionally designed a poor drainage system, the policy’s intentional acts exclusion will apply and preclude coverage. Likewise, the policy does not cover losses arising from faulty workmanship. If the company finds that faulty workmanship was responsible for the building’s problems, it will deny payment.

Even if an exclusion does not apply, the company will deny the claim if the policy does not apply to the particular loss. There might be some question as to when the loss occurred, particularly with problems that appear over time. The company will deny the claim if it determines that the loss occurred before the policy took effect.

Although the you might be alarmed to receive a reservation of rights letter, the letter does not necessarily mean that the company and the insurer must be adversaries. It merely means that the insurer has concerns about some of the allegations. With complex insurance coverages such as Professional Liability, it is not unusual for the insurer to issue such a letter. Work closely with our brokers, and the insurers’ claim departments, to ensure that all relevant information is available, ensuring a prompt and fair claims settlement.

MINIMIZE WORKERS COMP CLAIMS BY GUARDING AGAINST THE FLU

By Business Protection Bulletin

The federal Centers for Disease Control and Prevention has estimated that between 1.8 and 5.7 million people in the U.S. contracted the H1N1 virus between April and July 2009. Although many of them might have picked up the virus from contact with family and friends, it is very likely that many became infected at their workplaces. Infected workers might not have realized they had the virus, or they went to work despite feeling sick. Exposure to communicable illnesses is a common occurrence at the workplace. If an employee becomes ill, misses work, and requires medical treatment, does the employer have to provide her with Workers Compensation benefits?

Workers Compensation laws require employers to pay benefits to workers who suffer injuries or illnesses that arise out of their employment. It might be relatively easy to determine that a particular injury arose from someone’s employment. For example, a carpenter who slips and falls off a ladder while installing walls in a new home is clearly on the job; Workers Compensation should cover the costs resulting from the injury. Illnesses, especially viral illnesses like influenza, can be more difficult for investigators to trace. A worker who gets sick might have contracted the virus at work, at the gym, on the subway, or any number of places.

According to the International Risk Management Institute, insurance investigators and physicians must answer several questions about an individual’s illness to determine whether it is work-related.

  • Is the relationship of the illness to the exposure at work logical and plausible?
  • Was the dose of the viral agent to which the person was exposed large enough to cause the illness?
  • Are the person’s signs, symptoms, and test results characteristic of what a person with the illness would have?
  • Where exactly did the person come into contact with the viral agent?
  • Could the person possibly have been exposed to the viral agent outside of the workplace?
  • Does all the evidence establish that the person’s exposure to a viral agent at work caused his illness?

People can be exposed to H1N1 and other flu strains in dozens of places, only some of which are work-related. Employers must evaluate the facts of a particular case when deciding whether or not to contest a Workers Compensation claim for work-related illness. If the employee’s duties kept him solely within the office and no other employees showed any flu-like symptoms, the employer might contest the claim successfully. However, if other employees showed signs of having the flu or the worker regularly has physical contact with vendors or customers who might have exposed him, the worker’s claim might be successful.

To reduce the chances of a successful occupational illness claim, employers should:

  • Encourage employees to get vaccinations each year as the flu season approaches.
  • Foster a work environment where employees who feel ill can stay home from work without fear of negative consequences.
  • Where practical, allow telecommuting for employees with flu-like symptoms but who still want to work.
  • Provide hand sanitizers for employees and visitors to use.
  • Provide employees with educational material about H1N1 and other flu strains.
  • If an employee becomes ill while at work, segregate him from the other employees until he can go home. Require him to take precautions, such as covering his nose and mouth, if he must visit common areas of the workplace.

Businesses should also consider creating a plan for dealing with a pandemic, should it occur. Visit www.flu.gov to find information on how to write the plan and for other resources on managing flu risks. People spend much of their waking hours in the workplace. Businesses therefore play an important role in keeping them healthy and safe. With planning and common sense precautions, businesses can stay productive and healthy during flu season. And be sure to contact our office with any specific Workers Compensation questions.

CRIME INSURANCE IS CRITICAL IN TODAY’S BUSINESS CLIMATE

By Business Protection Bulletin

According to a 2008 study conducted by the Association of Certified Fraud, U.S. businesses lose about 7% of their annual revenues to fraud. This equates to a staggering $994 billion loss each year nationwide to employee fraud. Even worse, occupational fraud schemes are extremely costly to a company’s bottom line, with the median loss in the 2008 study coming in at $175,000!

The three most common categories of employee scams are: Fraudulent statements, asset misappropriation, and bribery or corruption. Two out of five businesses suffer more than five instances of fraud, and one in four loses at least $1 million as a result of fraud. For these reasons, Crime insurance is a wise purchase, extending coverage to you and your business for fraud-related financial losses.

In addition to covering employee fraud, most Crime insurance policies also cover third-party scams including forgery, counterfeit currency, and theft of company property. Many policies also cover money losses due to computer fraud by hackers who seek company funds, customer credit card numbers, or other financial data.

In fact, as more and more business is done over the Internet, computer coverage and protection against unauthorized funds transfers or computer access are on the rise. Technology has opened the door to make some fraudulent schemes much easier to accomplish. For example, with a simple scanner, it is easy to forge a check, and many fraudulent Web sites attempt to collect personal data from unsuspecting victims.

Not all fraud-related crimes involve money. Some involve company goods that have no apparent value. Keep in mind, there are markets for many unusual items. One insurance company tells of a meat packing plant where an employee was stealing animal fat, and selling it for personal gain.

Although many employees carry out such crimes because they are disgruntled, the most common motivations for employee fraud are greed, vindication against the employer, and financial need. Regardless of motive, you need to be aware of the possibilities, and adequately covered.

When employees get caught for such crimes, they do jail time, but companies never fully recover the total amount lost. That’s where Crime insurance comes in. With proper coverage, you can recoup your financial losses.

In addition to Crime insurance, it is also recommended to maintain a strong system of checks and balances to ensure that unethical employee behavior doesn’t pay off. Such controls can affect your company’s insurability and premiums as insurers examine the extent of internal controls, as well as a company’s history of fraud losses when determining whether the company is a good risk. With a combination of Crime insurance as well as internal control procedures, you will protect your company as well as show dishonest employees that crime doesn’t pay.

YOUR SUBCONTRACTOR’S WORK IS DONE INCORRECTLY: ARE YOU COVERED?

By Construction Insurance Bulletin

Acme Construction, a home building company, constructed 20 homes in 2003. It hired subcontractors to perform the concrete work, plumbing, wiring, and roofing. One year later, it received complaints from two of the homeowners about cracks in their foundations. Acme notified its Liability insurance company. When the homeowners eventually sued Acme, the insurance company provided legal defense and set up reserves to pay for any resulting settlements.

Fast forward to 2005 when Acme built 35 homes to meet the demands of an active housing market. Other than the subcontractor who did the concrete work in 2003, Acme hired the same group of subs to work on these homes. When snow started melting after the winter of 2007, complaints started to come in about leaking roofs. Eventually, seven homeowners determined that they had to replace their roofs completely, and sued Acme for the faulty work. Acme again notified its insurance company. This time, however, the company denied the claims, saying that the insurance policy did not cover them. Acme had to pay for its own legal defense and liabilities.

What changed between 2005 and 2007? The insurance company added to the policy an endorsement that created a significant coverage gap: ISO form number CG 22 94 10 01, Exclusion-Damage to Work Performed by Subcontractors on Your Behalf.

This endorsement modifies an important exclusion contained in the ISO Commercial General Liability coverage form. Without this endorsement, the exclusion states that the insurance does not apply to damage to the insured’s work if the damage arises out of it or any part of it and if the damage occurs after the insured has finished the work. However, the provision gives coverage back if the damage arose out of work performed by a subcontractor working on the insured’s behalf. In the 2005 incident, Acme had hired a subcontractor to build the foundations for the new homes. Because the subcontractor had done the faulty work, Acme’s CGL policy covered the resulting defense costs and liability.

Endorsement CG 22 94 strips that coverage give-back from the policy. With it attached, the policy does not cover liability for damage to the insured’s work and arising out of it, even if another contractor actually performed the work. Accordingly, Acme’s policy did not cover its liability for the defective roofs. Without the attachment of this endorsement, Acme would have had coverage.

An insurance company might add this endorsement to a policy in the belief that faulty construction is a business risk, not an insurable one. Accidents such as slips and falls, unintentional fires, and injuries suffered while using a product are all examples of insurable risks. Performing work improperly, mismanaging cash flow, and making poor strategic business decisions are examples of business risks. Insurance companies feel they cannot insure business risks because to do so would remove an incentive to reduce those risks. If a carpenter knows he can collect insurance if he does a sloppy job building a house, he has less of an incentive to build it well. When a company attaches CG 22 94 to a policy, it is transferring the risk of a subcontractor’s poor performance back to the insured.

Almost all contractors subcontract at least some of their work, so this is an issue to take seriously. Review their Liability insurance with our agents to determine whether you have this endorsement. Since it can present a very significant coverage gap, discuss alternatives, such as negotiating with the company to remove it or seeking another company that is willing to leave it off. Even if it means paying an additional premium, removing the endorsement could save a lot of expense in the long run.

SAVE ON WORKERS COMPENSATION COSTS BY MAKING SAFETY A TOP PRIORITY

By Construction Insurance Bulletin

In 2008, U.S. employers reported 3.7 million nonfatal occupational injuries and illnesses, according to the U.S. Bureau of Labor Statistics. Although this number was down from the prior year, it still shows that workplace safety must be a priority for employers. When workers get hurt or sick on the job, productivity suffers, the employer becomes less attractive to the other employees, and managers’ attention shifts away from growing the business. Preventable accidents also hurt the bottom line in another way — they eventually raise Workers Compensation costs by increasing the employer’s experience modification factor.

The experience mod is a number calculated by the Workers Compensation rating bureau in the employer’s state. It’s a reflection of how the employer’s loss history for the prior three years (not including the current year) compares with that of an average employer in the same industry. It takes into account the size of the employer’s payroll for those years, and the number and severity of its losses. The formula penalizes an employer more for frequent losses than for expensive ones. For example, an employer with 10 losses of $3,000 each will have a higher experience mod than will a similar employer with one loss of $30,000. The insurance company must, by law, multiply the employer’s Workers Compensation insurance premium by the experience mod factor. A factor of less than 1.0 reduces the premium, while a factor greater than 1.0 increases it. Therefore, it makes financial sense for employers to take steps to prevent frequent on-the-job accidents.

There are several things employers can do to improve their accident records and save on Workers Compensation premiums.

  • Make workplace safety a top priority. The things that are important to managers become important to workers. Provide continuing training to workers on job site safety and enforce safety requirements.
  • Obtain and review publications about the industry from the U.S. Occupational Safety and Health Administration. These publications provide practical recommendations for preventing injuries. For example, the “Construction – Hand and Power Tools” category has a document titled, Safeguarding Equipment and Protecting Employees from Amputations.
  • Keep the work environment clean. This reduces the risk of employees contracting airborne illnesses; eliminating clutter makes trip-and-fall accidents less likely.
  • Maintain machinery and equipment in good working order. Check it regularly for safe operation.
  • Institute programs to keep the workplace drug and alcohol free. Within legal parameters, test employees for drug and alcohol use.
  • Review loss information from insurance companies. Look for trends in the types of losses that occur. They could indicate dangerous work procedures, incentives that cause employees to rush, defective tools, or another factor in need of correction.
  • Take advantage of the expertise in the insurance company’s loss control department, particularly if the company specializes in insuring businesses in your particular industry. They can recommend measures that have proven to work for similar businesses.
  • Monitor employee morale. Unhappy workers can become careless or slipshod in their work. Take steps to improve morale and to deal with employees who might be causing problems.
  • Review the experience mod worksheet with one of our insurance agents. Ensure that the insurance companies have reported all losses accurately to the rating bureau. Ask to have errors corrected, and follow up until it happens.
  • Require employees to report all injuries, no matter how minor they appear. Make sure that injured employees receive prompt medical attention.

No one benefits when employees get hurt on the job. With focus and effort, employers can make workplace injuries less frequent and less severe. That will make your business a better place to work, and add hard-earned dollars to the bottom line.