This is Josh Gurley with HM Advisors and today I want to talk with you a little bit about why every business in Georgia needs a $2,500 deductible on workers comp. Now, I know what you’re thinking. “Man, I already pay an arm and a leg for workers’ compensation. Why in the world would I take a deductible?” Well, today we’re going to unpack that from top to bottom.
The first reason that you should consider taking a deductible on your workers’ compensation is that you receive a credit on your policy for doing so. The policy premium could get lowered by 5 or 6 percent if you take that deductible. If you pay a lot of money for your workers’ compensation, say, hundred thousand or 200,000 or $250,000 that can certainly make a dent in the premium. More importantly it buys you a little bit of room for what I’m going to talk about next.
Experience Mod Rating (EMR)
The next reason that you should consider a $2,500 deductible is because in Georgia we have a very unique situation called a net reporting state. If you’re a company of any size in Georgia, what you already are of is that every single year you get a letter in the mail with an experience mod rating factor, right? You pay a lot of attention to this rating, especially if you’re in construction, because if it’s over a 1.0 it becomes very difficult to get jobs.
If you’re in the utility business, any type of construction, government work, or maybe you’re working on a base or something like that, it becomes very difficult to obtain those new jobs. And so your experience mod factor matters a lot.
Georgia is a Net Reporting State
So as I mentioned before, Georgia is a net reporting state, meaning any claim under the $2,500 deductible is not going to be reflected on your EMR. That’s a huge thing because a lot of people are very reluctant to file the small claims. Small claims can eventually turn into big claims when they’re not dealt with initially. That deductible is going to allow you to deal with those small claims and still preserve your experience mod rating factor. If you were going to pay those claims out of your pocket and you were not going to file those on the insurance, you’re spending the same money either way.
You might as well file it on the insurance, have a record of it, but let it be below that deductible. Now, a lot of people are going to say, “But doesn’t that still hurt me with the insurance company?” It’s absolutely not going to hurt you with the insurance company as long as our frequency on those claims is not too high.
We don’t really want to have too many of those types of claims, but if we have a couple, the insurance company is not going bat an eye. They’re actually going to be thankful that you decided to participate in the risk a little bit.
Let’s Talk
And those are some reasons why I think every single company in Georgia needs a deductible that is $2,500.If you have any questions about this topic or you want to talk about the rules about work comp, or if you want to talk about anything else related to the experience modification factor please don’t hesitate to reach out.
A lot of the small claims hurt you the most. You’ve probably heard that before. Maybe you want to talk a little bit about what the ERA state means. Perhaps as a business owner you are looking to get your experience mod lowered or trying to get out of a PEO (Professional Employer Organization). Or you could be trying to get more jobs because you need to get that mod under a 1.0. It doesn’t matter what it is. I would love to talk with you.