As the economic impact of the COVID-19 pandemic continues to create chaos for many small business owners, you may find yourself looking for opportunities to cut costs.
If you’re considering furloughing workers now, or if you’ve already made the decision to do so, you should know the ways it can potentially impact your business insurance policy. Most insurance carriers know that, during a furlough, you’re not working as you normally would, so they may be equipped to help you find solutions—including adjusting or lowering your premiums temporarily.
We’ve answered a couple common questions to explain how the process can work:
Questions about furloughing employees?
Visit the Coronavirus Legal Center and ask a lawyer today.
How can I lower my general liability (GL) insurance payments?
Also known as GL insurance, this type of policy can help protect you if there’s a third-party accident or injury on the job, or if you or one of your employees causes property damage to a third-party.
During a furlough, insurance agents know you’re not operating “business-as-usual.” You’ve reduced your workforce and put limited hours in place. Or you may have shut down your business altogether. Either way, if you’ve furloughed workers, your goal is to get through a difficult time by temporarily reducing the costs of payroll without having to go through layoffs.
Because employees may work less during a furlough:
- There’s reduced risk to your business. When fewer employees work, it’s usually less likely for an accident or injury to happen. You may use fewer tools and equipment, too—meaning damage is less likely to happen. For example, if you’re a contractor who has furloughed employees and cut your business in half, you’re less likely to experience an incident.
- There’s a greater financial constraint. Furloughing employees often happens due to a loss in revenue. In this case, it is most likely because your business may be shut down or offering limited services. Fortunately, most insurance agents understand the situation and are typically willing to work with you to help you keep your policy.
The bottom line: If you’re considering a furlough or if you’ve already made the decision, you should talk to your insurance agent right away. Explain how your payroll has changed, how many hours employees are working (if any), and when you plan to end the furlough (if you know.)
Most likely, your agent can work with your carrier to try to help reduce your premium. And, depending on your situation, you may be able to suspend payments altogether.
No matter what, you should try to avoid canceling your policy altogether. An abrupt cancelation can impact your ability to secure insurance in the future. It can also leave you unprotected if an unexpected incident occurs.
Even though business is limited now, you never know what could happen in the future.
What should I do about workers compensation insurance?
If you have employees, you most likely have workers’ compensation insurance. This policy can help protect you if a worker gets injured or sick on the job. For example, it can pay for ambulance rides, emergency room visits, medications, and even employees’ wages while they recover.
In many states, it’s the law to carry workers’ compensation insurance if you have employees, even if you have just one part-time worker. However, if your employees are temporarily furloughed, you may be able to contact your insurance agent to ask about temporarily suspending or reducing payments with your carrier, as your employees are no longer working at or for your place of business.
In addition, during a furlough:
- You’ve reduced the risk of an accident or injury by limiting employees’ work schedules. Perhaps you’ve shut down your business altogether, or you’ve asked employees to take a few weeks off. Either way, when your team is on furlough, you may be less at risk for a workplace incident than you would be if everyone was still working.
- You may be strained to make regular payments. Chances are, you may be losing income due to COVID-19. As a result, it’s important for you to reduce extra expenses. Fortunately, you can work with your agent and carrier to see if it’s an option to temporarily suspend or lower your policy payment options.
Once you are ready to transition back to being fully-staffed, work with your insurance agent to re-adjust your policy . Together, you should discuss key changes that happened during the furlough, including:
- If you’ve lost employees and plan to rehire soon.
- If your business’s revenue has significantly changed.
- If you will need to institute another furlough in the near future.
- Anything else that has changed during this time period
Remember, nothing lasts forever, and that typically includes a furlough. We’re living during a uniquely difficult time—for the public and for small business owners. If you have to institute a break, it’s a tough decision. But the more you act with integrity and try to plan ahead, the greater your chance for success.
Simply Business, Inc. is not a law firm and does not provide legal advice This article is intended to be used for informational purposes only and is not a substitute for obtaining professional legal advice. If you have legal questions, ask a lawyer.
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