Purchasing construction insurance is not always the easiest task. Despite the issue of cost, and what is being covered for that amount, the language of insurance, and how brokers and insurance carriers convey that information can sometimes be somewhat confusing.
This article will focus on a couple of things that can help lessen the confusion and ease some of those insurance pains.
By understanding the issues involved a contractor will have confidence when the time comes to negotiate rates, or when hiring and determining the status of certain employees, which will help with Workers Compensation insurance. In addition, using these helpful pointers can save time and money, as well as reduce unexpected financial concerns.
Negotiate with the rate, rather than the premium
Because they are often very busy, contractors like to get right to the point. They will often focus on the cost for insurance, which translates directly into premium. However, they should really be considering what is the rate.
By definition, this is the dollar amount paid for each $1,000 of revenue or $100 of payroll. (Example with a rate of $12.5, the contractor will pay $12.50 in premium for every $1,000 of revenue).
Negotiating with the rate places the contractor in a better position. The insurance carrier may explain that a 10% premium increase is entirely due to the increased business, which may make perfect sense.
However, contractors strive for continued savings. A larger exposure usually allows a contractor to negotiate a lower rate, which is why they should ignore whatever the premium is when negotiating insurance and focus on lowering the rate.
Misclassifying a worker can have substantial, costly consequences
If a worker has been misclassified as an independent contractor, several things could happen:
1.The worker could be entitled to seek overtime payments for work performed and other benefits for which they might be entitled
2.Such discrepancies could lead to an overtime audit of an entire workforce, or
3.It could result in a class action lawsuit for unpaid benefits and any overtime pay that may be owed
Independent contractors with newly conferred employee status also may seek other benefits, including unemployment benefits or workers compensation, or bring legal action that they would not have done when they thought they were independent contractors.
While misclassifying a single worker may lead to some liability for overtime payments and other benefits, employers should also take a hard look at the bigger picture. An IRS audit could possibly lead to an audit by the federal or state Department of Labor.
Such an audit might examine a company’s overall approach to independent contractor classifications and overtime and result in employment practices violations.
Remember, regardless of classification, workers can be injured while on the job, and contraction insurance will come in handy when on the job accidents occur.
By Jade Scheffer