Nevada has had an “industrial insurance” law on the books since at least 1943 that protects the rights of injured workers and requires employers of all sizes to provide compensation in some form, either by purchasing traditional insurance, or proving they are financially capable of self-insuring. For most small to mid-sized businesses, the simplest and most cost-effective solution is purchasing NV workers compensation insurance.
Since 2001, Nevada has been had a privatized workers compensation market, meaning employers can purchase insurance from the competitive marketplace, from an insurer of their choice. This competitive marketplace has led to stable rates that have generally trended downward over the last decade. We find, however, that most business owners don’t truly understand how Nevada workers compensation insurance works. Here’s a basic primer on the policy, rating and audit process:
One of the first things you will notice about workers compensation insurance is that employees are broken up into classifications. This allows insurers to charge an appropriate price based on how hazardous the job duties are. For example, clerical staff in your business might be charged a rate of around .5%. Sales staff that visit customer locations, however, might be charged around .8% because they have a slightly higher exposure to injury by traveling to other locations. Contractors will often see huge rate disparity between occupations. For example, roofers pay substantially more other trades because they are exposed to heights and have a higher frequency of claims.
Coverage Part I & II
There are two types of coverage listed on your policy: workers compensation (part I) and employers liability (part II). Only employers liability has a listed policy limit of at least $100,000/$500,000/$100,000 (per employee, policy aggregate, disease limit). Workers compensation coverage (part I) does not have specified coverage limit simply because there is no limit. The insurance company is obligated to pay whatever the cost of your employee’s injuries, lost wages, rehabilitation expenses and, potentially, a settlement for disability or death.
Every workers compensation policy is auditable and you should expect to complete at least a voluntary audit form every year. Occasionally an insurance company will send an auditor to your business to examine payroll records. These on-site audits can be intrusive, but you must understand the insurer has the right as part of the policy conditions to verify your payroll as reported to them.
Policy Fees, Surcharges, and Discounts
When examining your Nevada workers compensation policy you will notice several fees, discounts or surcharges itemized on the rating page. One of the most common fees is the “Expense Constant”. Think of this as a policy fee that covers the insurers underwriting costs. You will also notice a charge for Terrorism or DTEC, both of which are mandatory fees to cover the costs of providing compensation for victims of a terrorist attack (workers compensation DOES cover injury or death to employees caused by a terrorist attack). One of the least understood charges is the Experience Modifier or e-mod. Your e-mod is derived by reviewing the last 3 years, minus the current year, of claim history. This modifier can be either a credit (for good loss history) or a debit (unfavorable loss history). The mathematical formula used to calculate your e-mod is complex, but what you need to know is that the debit or credit follows your company no matter which insurer provides your workers compensation. E-mods are calculated by NCCI (National Council on Compensation Insurance) and you should be sent a copy of the worksheet each year that shows you how the factor was derived.
We hear it all the time from business owners: “I don’t have employees, only independent contractors”. Unfortunately, state law (and very likely federal law) probably won’t agree with your classification of workers and “independent contractors”. Nevada, and most other states, uses and independent enterprise rule that very specifically defines who qualifies as an independent contractor. Short of meeting that definition and those workers are considered statutory employees. Should one of them be injured while working on your behalf, you would be responsible for all the associated medical costs, lost wages, etc. For more information, read about independent contractors myths in this guide published the Nevada Department of Industrial Relations.
Remember Safeguard Insurance is a workers compensation insurance expert. We have access to dozens of insurers that can provide you with highly competitive rates and top-notch service in the event of a claim. Contact us today and let us provide you with a no-obligation proposal.