Joe worked as a roofer for 15 years and never had an accident. His luck changed when he slipped and fell off the roof on the job. Fortunately, it was not a two-story house. While he did end up breaking some ribs, an ankle, and his wrist, it could have been much worse. Luckily, the owner of the company was in full compliance with New Jersey’s workers' compensation laws and had a policy in place. The insurer paid for Joe’s medical bills, covered his salary while he was out of work, and even paid for the physical therapy recommended by his doctor. After a couple of months, Joe returned to work.
Even though this was an accident and Joe’s employer was not at fault, without the workers' compensation policy, Joe might have sued and won. Lawsuits and the resulting judgments or settlements can be extremely expensive and disruptive, especially for a small business. In New Jersey, like many other states, having a workers' compensation policy in place is required by law. While workmans' compensation is required coverage, it is also a fairly complicated insurance product. Consulting a workers' compensation insurance professional is highly recommended to ensure that you are in full compliance with the law as well as completely protected.
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New Jersey Workers' Compensation Rules and Regulations
All New Jersey employers are required by law to have workers' compensation coverage or be approved to self-insure, regardless of the number of employees. Like many other states, New Jersey’s workmans' compensation program is designed to protect your employees if they are injured or have an accident on the job, while also shielding your business from expensive employee lawsuits. It’s a no-fault program, which means that an injured employee will receive benefits regardless of who was at fault in the accident or injury. In exchange for these benefits, your employee gives up the right to bring a civil suit against your business for pain and suffering, except for intentional acts committed by your company.
The Basics of New Jersey Workers' Compensation Insurance
Who Is Covered?
All New Jersey employers must have workers’ compensation coverage or be approved for self-insurance. Even out-of-state employers may need workers’ compensation coverage if an employment contract is entered into in New Jersey or if work is performed in New Jersey.
What Is Covered?
Workers' compensation coverage covers a wide variety of injury situations. Sudden accidents such as trips, falls and slips are covered, as are injuries that can take longer to manifest, such as repetitive stress injuries or back and neck injuries. Illnesses such as heart and lung disease and cancers related to working conditions are also covered by a workers' compensation policy. New Jersey workmans' compensation insurance even extends beyond the doors of a business. If an employee is traveling for work or a company errand, or even if they are at an after-hours work-related party or networking event when they are injured, they are covered by the workers' compensation policy.
Where Can I Buy It?
New Jeresy Workers' compensation insurance can be obtained through one of the 400 private insurance companies that are licensed and authorized to sell it in the state of New Jersey. You can purchase a policy directly from the insurer, or through an agent or broker. Penalties for failing to secure a workers' compensation policy can be severe. The law states that failing to insure can result in penalties of $5,000 for the first 10 days, with additional assessments of $5,000 for each subsequent 10-day period of failure to insure.
How Much Does Workers' Compensation Insurance Cost in New Jersey?
Workers' compensation policy rates are always set by the state, and New Jersey is no exception. Premium rates are set to reflect job hazards, meaning more hazardous professions will come with higher premium rates than jobs with a lower risk of accidents. A good safety record can also help lower an employer’s rate. Insurance companies that write workmans' compensation policies use class codes to identify the various categories of workers. These codes are then used to assign a premium rate to those employees.
New Jersey is a bit different in that it doesn’t use the class codes set by the National Council on Compensation Insurance. Instead, the Garden State has established the New Jersey Department of Banking and Insurance, which is responsible for establishing and maintaining regulations and premium rates for workers’ compensation and employers’ liability insurance. Class codes are assigned a premium rate, which is the rate you will pay for each of your employees in that particular class. Unlike other states, New Jersey has one set rate, not a range of rates, for each class code. The more dangerous the job, the higher the premium rate assigned to that class code.
Here's an example. New Jersey carpenters are assigned the class code 5645 with a premium rate of $19.51, which reflects the relatively dangerous work they perform and the likelihood of on-the-job accidents. This base rate is applied to every $100 of payroll. The base rate is multiplied by the employer’s payroll for all of the carpenters they employ to determine their premium.
- New Jersey Classification Code: 5645 Carpentry
- Base Rate: $19.51
- Employer Payroll: Example: $100,000
- Premium Calculation: $19.51 per $100 or 19.51% of payroll.
- Estimated Annual Premium: $19,510
The majority of employers will have more than one class of employees. They may have clerical, accounting and sales staff, all of whom would fall under different class codes. All of the various class codes and premiums are totaled to determine the full workers' comp premium for the business. New Jersey workers' comp rates are extremely high and currently rank as the 3rd highest in the country, according to a recent study. New Jersey workmans' compensation rates are roughly 150% higher than the national average.
Workers' Compensation Discounts Available in New Jersey.
- Premium Discount: These discounts usually apply to businesses that exceed a certain premium threshold, for example, $10,000. In most cases, the larger your premium, the bigger the discount you can expect.
- Drug-Free Workplace: Implementing a drug-free workplace program can result in a discount of up to 5%. The actual discount amount and program details vary by insurer.
- Group Association Discount: If your business is part of a professional, industry or trade association, you may qualify for a discount. Average discounts fall in the 4% range.
- Safety or Fall Prevention Programs: Businesses that implement and maintain safety or fall prevention programs may qualify for a discount. These programs vary by insurer and may need to be certified by the state.
Experience Modifiers Can Lower Your Premium
Like most states, New Jersey allows an experience modifier (e-mod) to be applied to the premium, which can help lower or raise your workers' compensation costs. E-mods are mainly used as an incentive to prevent claims on your policy. E-mods can lower or raise your premium rates depending on your claim record, relative to the industry your business operates in. It works like this. If your company files more claims or has higher losses on average than other companies in your industry, a surcharge or debit e-mod will be applied to your premium rates, which will push up the cost of your policy. If you manage to keep losses low and control your claims, your business will be given an e-mod credit, which will lower your premium costs.
New businesses start with an e-mod of 1.00, which is basically neutral. If your business stays claim-free, your e-mod number will drop below 1.00. This will drop your premiums. Numerous claims or high losses will lead to an e-mod number above 1.00, bumping up your premium rates. The total premium for each employee can be calculated by multiplying your base class rate and experience modifier by an employee’s payroll, or Base Rate x Payroll x E-Mod = Premium. When it comes to your workers' compensation premium, one of the factors that is completely under your control is the e-mod. Implementing safety programs can reduce accidents and claims, keeping your e-mod number low. Remember, numerous small claims will be penalized more than a single large claim.
Where Can I Get New Jersey Workers' Compensation Insurance?
Workers' compensation insurance is required for all employers in New Jersey and failure to carry this coverage carries some steep penalties. An independent insurance agent can help ensure that you are fully covered and in compliance with all state laws. In addition, they will do all of the legwork for you, gathering quotes, applying all applicable discounts and presenting you with the best insurance options for your particular business.
Get started today, contact an agent now to discuss your New Jersey workers' compensation insurance options.