Most contractors have at least a general knowledge of workers compensation insurance . They know that they need it and they know it can cost a lot of money. But only a few really understand the experience modification factor and what it could mean for their future construction company insurance policy costs. This little primer will help you understand just how important it is to protect your mod and how to do it.

The experience modification factor of workers compensation policies, referred to as the experience mod or just mod for short, is the insurance industry’s way of assigning higher rates to businesses with poor loss experience and lower rates to those who have had more favorable loss experience. Each business has its own unique experience modification factor and this factor is applied to the rates on their policy. For example, if you have had a lot of losses, or perhaps a few large losses, you might find yourself with a mod of say, 1.35. If this is the case, then your workers compensation insurance policy premium will be adjusted upward by 35% to reflect your bad experience. Likewise, if your company hasn’t has a work comp loss for several years, your mod might drop as low as .80 and this would mean a 20% reduction in your overall workers compensation policy premium.

So how is this mod calculated? Well, the first thing you need to know is that the mod is calculated based on past experience. That means what happens today will take several years to come back and bite you. Also, the experience period for the mod in North Carolina is 3 years, so once you get some losses in your mod calculation, they will stay there for a while. I want to leave a more detailed explanation of how the mod is calculated to a later blog, but for now, understand that it is not only the number of losses (called frequency) that plays a part, but also the amount paid out (called severity) that impacts the mod calculation. And a little of both, frequency and severity can really run up your mod.

So what can you, as a business owner, do to protect your mod? A lot of how your mod will affect you, both good or bad will be determined by which insurance company you choose for your workers compensation policy. I say this, because, although you may be as careful as you can to avoid injuries among your workers, there is no substitute for an insurance company that is actively working for you to help you prevent claims and reduce the severity of existing claims. So when evaluating which workers compensation policy to purchase, you should consider more than just the premium on the first policy. Find out what that insurance company and that agent are going to do to keep your costs low over the long term.

Choose a workers compensation insurance company that will work with you to help you with both prevention and severity reduction. Prevention can come in the form of safety inspections, and loss control techniques that the insurance company can share with you. Reduction can come in the form of programs that help your injured workers get back to work more quickly. Some of the best workers compensation insurance companies even have their own nurses and doctors. Also, you want to purchase your workers comp coverage from a company that assigns case managers to each claim to stay on top of all the medical bills and the disability payments to keep the payout as small as possible.

At Clinard Insurance Group, in Winston Salem, NC, we specialize in helping the owners of small contracting companies navigate the complex waters of insurance policy and insurance company selection. We can help you find a pro-active insurance company that will help you reduce the number of work comp claims and keep the claims that happen from spiraling out of control. Because contractors insurance is our specialty, we can help you with your insurance needs whether you need help with carpentry insurance, carpet cleaner insurance, electricians insurance, flooring insurance, HVAC insurance, grading and excavating insurance, insulation insurance, landscaping or lawn care insurance, masonry insurance, painters insurance, plumbers insurance, siding insurance or even guttering insurance . We have built special niche programs for many different types of contractors and we encourage you to call us, toll free, at 877-687-7557 or visit us on the web at www.TheContractorsHelper.com.

It’s so easy to take a car off of your car insurance policy , just call your agent and tell them. And when you have signed your title over to the buyer, it seems like you are really finished with the process. But, a cautionary tale her can remind you that under no circumstances should you ever let the new buyer drive off with your tags still on that vehicle. It could ruin you financially.

In NC when you buy a car from someone, even though they have signed the title over to you, the state doesn’t recognize that transaction until the buyer registers the car. And the one thing that will force the new buyer to do this is if he or she doesn’t have any tags to put on the car. Here’s a story that drives this point home.

Someone I know, who was not one of our clients, sold one of his vehicle, a pickup truck, to a friend. He then called his agent and asked them to take the vehicle off of his policy. The buyer of the car drove off with his license plate on the vehicle and then they failed to go to the DMV to register the car in their name and get their own tags. They also failed to add this truck to their personal auto insurance policy. A few weeks later, they loaned the truck back to my friend as he had to pick up a large item from the store. On the way to the store, my friend had a terrible accident which resulted in nearly $100,000 of damages. In this case, he is driving a car, registered in his name, without insurance. But in his mind, he had sold it and he shouldn’t need insurance. As you can imagine, he was held accountable for all of the damages from this accident.

This is an odd story but the same result could have happened if the new buyer’s were driving and had an accident. The real key take away knowledge from this story is that you should never, ever let someone drive away with your tags on your vehicle. It leaves you exposed to losses you cannot control and could ruin you financially.

At Clinard Insurance Group, in Winston Salem, NC, we work hard to make sure that all of our clients are informed insurance consumers. If we can help you with your auto insurance, your home insurance, or even your business or life insurance, please call us, toll free at 877-687-7557 or visit us on the web at www.ClinardInsurance.com.