How Knowing Your Workers’ Comp Policy Dates Can Save You Money

Many business owners pay their workers’ compensation insurance premium once a year and then forget about it until it’s time to renew. But waiting until the last minute is not the best way to keep your costs down.

Workers’ comp insurance can be tricky because claims can last a long time and affect your premiums for years.

Workers’ comp insurance can be tricky because claims can last a long time and affect your premiums for years.

(Wickert, 2021)

To keep your insurance costs lower, it’s important to review your claims regularly and familiarize yourself with the key dates in your policy.

What Is the Experience Modification Factor (X-Mod)?

Your insurance company uses something called the Experience Modification Factor, or X-Mod, to decide how much you pay for workers’ comp. If your company has fewer or less severe claims compared to others in your industry, your X-Mod will be lower, which means you pay less. But if you have more or bigger claims, your X-Mod will go up, and so will your premiums.

Why Reviewing Claims Early Matters

About three months after your workers’ compensation policy starts, it’s a good idea to review all the claims you have open. This helps you:

• See which claims can be closed quickly.
• Reduce the amount your insurance company expects to pay on ongoing claims.
• Help injured employees get back to work sooner.
• Decide if it makes sense to settle any claims early.

Why three months? Because six months after your policy starts, the insurance company reports your claims and costs to a state office. That report helps calculate your X-Mod for next year. If the numbers they report are too high, you could end up paying more than you should.

How Past Claims Affect Your Future Premiums

When your policy renews, the insurance company looks at claims from the past three years — not the most recent year. For example, if your policy renews on January 1, 2025, they will look at claims from 2021, 2022, and 2023.

That means managing claims early in the policy year is very important. Fixing problems before the six-month mark can help reduce your costs in the future.

What Are Reserves and Why Do They Matter?

Reserves are the money your insurance company expects to pay for a claim in the future. They aren’t exact numbers, but more like estimates based on how serious the injury is and what medical care will be needed.

If reserves are set too high, your costs will be higher, even if the actual payments end up lower. Keeping an eye on reserves and asking your insurance company to adjust them when needed can save you money.

Keep Checking Throughout the Year

Even after the six-month report, it’s smart to keep reviewing your claims every few months. This way, you catch any mistakes early and keep your claims on track. The goal is to avoid surprises when it’s time to renew your policy.

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Summary

By paying attention to your workers’ comp claims throughout the year and understanding when important reports happen, you can keep your insurance costs down. Don’t wait until renewal time to take action — the best time to manage your claims is during the first six months of your policy.

At Neighborhood Insurance Agency, we guide businesses in managing their workers’ comp insurance wisely. Our team helps you understand your policy, manage claims, and reduce costs — so you can protect your employees without overpaying. Contact us today to learn how we can support your business.