Workers’ Compensation Insurance is essential for protecting your business and your employees — but many small business owners make costly mistakes when setting up or managing their coverage.
From misclassifying employees to underreporting payroll, these errors can lead to unexpected audit bills, denied claims, or even legal penalties. Here’s what to watch out for — and how to stay compliant and protected.
1. Misclassifying Employees
Not all employees carry the same risk — and each role has its own classification code that determines your Workers’ Comp rate.
For example:
- Office clerks and sales reps have low-risk codes.
- Roofers, electricians, or landscapers are high-risk.
Using the wrong class code can lead to overpaying premiums — or worse, owing thousands during your year-end audit if your workers were underclassified.
💡 Tip: Always review your class codes with your insurance agent when you hire, promote, or reassign employees.
2. Not Reporting All Payroll or Subcontractors
Some businesses try to lower premiums by reporting less payroll — but this often backfires at audit time.
If your insurer finds discrepancies, they’ll bill you for the difference, and sometimes add penalties or interest.
Subcontractors are another common issue. If you hire a subcontractor who doesn’t carry their own Workers’ Comp policy, you’re responsible for covering them under yours.
💡 Tip: Always collect proof of insurance (COIs) from subcontractors before work begins.
3. Failing to Update Your Policy as You Grow
Businesses evolve — and so should your Workers’ Comp coverage.
If you’ve added new employees, locations, or service types but haven’t updated your policy, you could be underinsured or non-compliant.
💡 Tip: Notify your insurance agent whenever you make major business changes, so your coverage stays accurate and up to date.
4. Ignoring Safety Programs
Many business owners overlook how much safety affects their Workers’ Comp cost.
Accidents drive up your Experience Modification Factor (MOD), which directly raises your premium.
💡 Tip: Invest in safety training, regular equipment checks, and clear reporting procedures. A solid safety record saves money — and protects your people.
5. Forgetting Owner Coverage or Ghost Policy Needs
If you’re a sole proprietor, subcontractor, or owner-operator, you may think you don’t need Workers’ Comp.
But many contracts require proof of coverage — even if you have no employees. That’s where a Ghost Policy or Owner-Included Policy can protect your business and keep you compliant.
💡 Tip: Ask your agent whether you need owner coverage or a Ghost Policy to meet state or contract requirements.
6. Not Shopping Around for Better Rates
Workers’ Comp premiums can vary widely between carriers. If you’re not comparing options, you could be paying more than necessary.
Independent agencies like Upstate’s Choice Insurance work with multiple carriers to find the best rate for your specific business type — saving you time and money.
💡 Tip: Review your policy annually and compare rates before renewing.
Avoid Mistakes. Stay Protected. Save Money.
At Upstate’s Choice Insurance, we help small business owners across South Carolina, North Carolina, and Georgia avoid common Workers’ Comp pitfalls.
Our experts will:
- Verify class codes
- Audit subcontractor compliance
- Implement safety strategies
- Compare top-rated carriers for the best rates
⚙️ Protect your team — and your bottom line. Get a free Workers’ Comp quote today!
📍 www.upstateschoice.com