If you own a restaurant, protecting it can be a pretty daunting task. There are a lot of moving parts when it comes to employees running food, taking care of guests, and proper safety handling techniques.
An independent insurance agent is a key advisor for any restaurant owner when it comes to workers' compensation insurance and how coverage applies. Having the right person in your corner when it comes to running your restaurant is important.
What Is Workers' Compensation Insurance?
First things first, you need to know what workers' compensation insurance is before you can know the laws that govern it. Workers' compensation insurance is an insurance policy taken out by an employer or independent contractor that will help pay for medical expenses of an injury or illness that occurred while working or as a result of an employee's job.
This policy will also pay for partial wages, usually up to two-thirds, for any employee, included owners, or independent contractors while they're recovering. An independent insurance agent is the perfect resource to have when it comes to knowing the ins and outs of workers' compensation coverage.
What Workers' Compensation Coverage Looks Like for a Restaurant
The restaurant industry reports one of the highest number of workers' compensation claims next to the construction industry. It's known as the slip and fall business, and does it ever live up to it.
As you can see, $10.4 billion with a "b" were spent in 2019 on falls in the workplace according to a recent study. This is a lot of money spent on disability reimbursements and medical bills that as a restaurant owner you could share. Having the best workers' compensation insurance in place that will help cover these otherwise very costly expenses is just plain good sense.
Some basic coverages involved in a workers' compensation policy for a restaurant is a good thing to know. Yes, you'll hopefully be working with a trusted advisor known as an independent insurance agent, but that doesn't mean you shouldn't understand how the coverage works so you can make an educated decision when purchasing.
The basics are like this for a workers' compensation policy:
- Coverage limit amount per occurrence for bodily injury
- Coverage limit amount per employee for bodily injury by disease
- Coverage limit amount policy limit for bodily injury by disease
Put it all together and it looks something like this: $100,000 per occurrence/$100,000 per employee/$500,000 policy limit
By the way, the $100,000/$100,000/$500,000 are the bare minimum basic statutory limits that are typically required by law for every employer or independent contractor to carry.
What Is the Best Workers' Compensation Policy, Exactly?
Below you will find a sample declaration page of a workers' compensation policy. Knowing what each item means is key to having a good grasp on your coverage and what kind of protection your restaurant business really has.
The example above uses $1,000,000 per occurence/$1,000,000 per employee/$1,000,000 policy limit. Since coverage can be as low as the statutory state minimum requirements and even higher than the example, it's best to discuss what your business needs coverage-wise with your independent insurance agent.
Now the best coverage is, well, relative. It all depends on your restaurant business specifics and risk factors. There are plenty of insurance companies that your independent insurance agent can put you with, each with their own flavor of restaurant-specific coverage and offerings. But the one that you and your agent decide to go with will have a lot to do with your operations as a whole. This will come down to:
- Safety management
- Employee training
- Past claims history
- Alcohol sales percentage
- Hours of operation
- And more
What Is Not Covered?
By now you should have a pretty good understanding of what goes into a workers' compensation policy. But what you need to also know is what it's not going to cover.
What's not covered under a workers' compensation policy:
- Full wages (this is lost income, and it will only cover partial usually up to two-thirds of regular pay)
- Non-work-related injury or illness (this is crossing the line into insurance fraud which is discussed next)
- Coverage more than what is offered on the policy (once your policy limits are exhausted for any one claim, that's it, there is no more coverage and it has officially become a personal problem)
Workers' Compensation Insurance Fraud Laws
Insurance fraud is a big deal. Filing a claim that isn't real or has been manipulated all in an effort to get a large payout from the insurance company should be taken very seriously mainly because it lacks integrity, but also because the consequences could be dire to you, your employee, and your business.
Some insurance fraud consequences:
- Penalties and fines ranging from hundreds to thousands of dollars
- Jail time from one year to thirty years
The result of filing a faulty workers' compensation claim and being caught isn't worth the risk. An employee can file a false claim wanting a payout for an injury or exaggerated illness. An employer can misclassify an employee to avoid them filing a claim in the first place, and a health care provider can extend the injury or illness to continue getting payment from an insurance company. As the employer, you set the stage and by setting up proper safety practices and a clean claims reporting process, you can help curb the chances of false claims being filed.
Cost of Workers' Compensation Coverage
Workers' compensation for a restaurant can vary in costs depending on if you've had any past claims, if you're a new entity, and what safety measures you have in place. A good agent will walk you through what most insurance companies are looking for when it comes to safe practices for a restaurant.
Following OSHA and sanitation guidelines, and having proper kitchen cleaning done on a consistent basis is all part of the game. Having an assigned safety officer is even better and could improve your workers' compensation insurance premiums for the better. More money in your pocket only adds to your bottom line and that has a nice ring to it. While it's near impossible to know what your individual workers' compensation premium will be, here are some other determining factors you can look out for.
Workers' compensation price-determining factors:
- Number of employees: This determines how much your rates will increase. More people equal more money.
- Gross annual payroll per employee type: Each employee is given a code that classifies their job duties and then charges a premium according to how risky or not risky their tasks are. The amount of money you pay them will determine the amount of premium per classification code. The more payroll, the more premium you pay.
- Experience modification rating: If your business has had workers' compensation insurance for a total of three years or more, and you are paying over $5,000 in annual premium, then you'll be assigned an experience modification rating, aka "mod." This mod will adjust throughout the years depending on the number, length, and frequency of claims turned in. The better the mod, the better rate you will receive. It's kind of like a credit score for your workers' compensation policy.
What Is the Benefit of Having Enough Coverage?
The benefits of good coverage for your restaurant far outweigh the costs involved. Whether you're new to the hospitality scene or you have been in it a long time, things happen, and having proper protection for when they do is essential. A knowledgeable independent insurance agent is also a key component that can pay off in the long game. Along with proper coverage assessment, they can also save you some money because of their numerous carrier offerings and the ability to shop coverage year after year if needed.
Is Your Restaurant's Workers' Compensation Insurance State-Specific?
Each state has it's own rules when it comes to workers' compensation insurance because each state except for Texas has mandated workers' compensation coverage in some form or another. What that means for your restaurant is your state ultimately holds the keys to what requirements it has concerning workers' compensation. Some states require certain amounts. Most have a minimum coverage requirement, and when you are legally obligated to obtain it is different from state to state and dependent on the number of employees you employ.
There also may be some separate workers' compensation forms that could apply to coverage specifics on a policy. Knowing what your state specifics are concerning coverage types and different policy forms can be discussed with your local independent insurance agent. They have the know-how when it comes to workers' compensation regulations.
Benefits of an Independent Insurance Agent
Independent insurance agents have access to multiple insurance companies, ultimately finding you the best coverage, accessibility, and competitive pricing while working for you. And as your company grows and your needs change, they'll be there to help you adjust your coverage, up or down, to make sure you're properly protected without overpaying. Find an independent insurance agent in your community here.
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