Should I cancel my Workers Compensation Policy due to closure from COVID-19?

If your business is closed permanently, and no further work will be performed, and no employees will be paid again, then it is acceptable to cancel your policy. However, if you plan to reopen or have employees perform any work during the remainder of the policy term, the policy should be kept in place. Worker's compensation insurance premiums are based on payroll, not time. If a business has no payroll for a period, that will be taken into account during your next premium audit. Another reason to leave the policy in force is so that the employer can resume work immediately when conditions warrant, without having to apply for a new policy and ensuring coverage is in place before work is performed. There are substantial penalties for operating without worker's compensation insurance when legally required to have it. In addition, it may be more expensive to cancel a policy and be issued a new one when the business reopens: every policy premium contains what is known as the expense constant, which accounts for the insurance company's cost of issuing a policy. The employer must pay this charge each time a policy is issued, so an employer's costs can actually be higher if it cancels the current policy and then gets a new policy instead of leaving the existing policy in force. 

If you have additional questions, please feel free to contact Terry Fischer at 608-935-9308 or