Companies that manufacture powder coating products have unique needs when it comes to protecting themselves from potentially costly and / or litigious liability. As well, they have specific Workers Compensation requirements and rates.

Regarding industry liability the good news is powder coating's relative safety, and its reputation for protecting the environment - that is, minimal waste, no hazardous pollutants released into the air, and low heating and cooling needs.

Read on for more useful information or click to instantly find a local insurance expert to help you with your manufacturing firm insurance needs.

The Difference between Liability Insurance and Workers Compensation Insurance

Powder coating liability insurance protects the manufacturer from claims by third parties. A prospective customer who visits a powder coating company and trips over a loose tile in the front office would be compensated, if necessary, by the company's liability insurance coverage. If the injury is to a company employee, however, the firm's Workers Compensation insurance would be responsible for any compensation.

Liability Insurance Costs For Small Business Manufacturers

A small business can pay anywhere from $200 a year to over $1,000 a year for liability insurance. The cost varies according to industry, with manufacturing at the high end. The average liability insurance rate for small U.S. manufacturers is approximately $914 annually, for the most popular policy, which caps each occurrence at $1 million. Its total annual payout would be $2 million.

Powder coating companies must purchase coverage according to Workers Compensation code 9501. This code additionally covers such industries as painting, sign manufacturing and decal production. Determined by the National Council on Compensation Insurance, classification codes are based on operational hazards and job-site risk levels. Insurance carriers use these codes to assess underwriting risk and calculate Workers Compensation premiums.

Each state is responsible for acquiring and providing Workers Compensation coverage for the companies in that state. Coverage includes:

• Medical costs - The expense of a worker's recovery from a workplace injury;
• Travel - If the injured worker must commute far to reach a medical caregiver, those travel costs are covered. In Washington State, for example, that distance is 15 miles one way.
• Lost wages - If an employee is out of work due to the workplace accident, she or he is compensated for those lost wages. Typically, this coverage is less than 100 percent, as the first few days off work are not generally covered.

Workers Compensation fees vary not only by industry but by state. Premium index rates for employers in Texas, Nevada and Virginia, for example, can run less than $1.50, while those in California will typically pay in excess of $3.00.

The cost of powder coating Workers Compensation, as with other industries, is determined by payroll expense. For each $100 of payroll expense, there is a specific premium. The exact premium is also affected by the firm's classification rate and what is referred to as its experience modifier (MOD). This number reflects a company’s loss history and helps insurers assess risk more accurately.

New firms, and those with no reported accidents, have a MOD of 1.00. For those who have a history of accidents, each incident will negatively impact the manufacturer's experience modifier for three years.

Calculating Your Workers Compensation Premium

The calculation used to determine a powder coating manufacturer's Workers Compensation premium is the cost of payroll (divided by 100) multiplied by the particular rate for classification code 9501 (for that particular state), then multiplied by the company's MOD.

As example, the calculation for a new manufacturer - one with no accidents so far - and a payroll of $100,000, would begin with $100,000 divided by $100, or $1,000. Assuming an index rate of $2.50, the math then becomes $2.50 multiplied by $1,000 and then by the MOD of 1, for a premium of $2,500. However, unlike liability insurance, employees help pay this cost, through mandated payroll deduction. Typically the employee will pay less than half of this premium.

Contractors, manufacturers and industrial operators often face exposures beyond physical injuries—such as property damage from powder coating equipment or ventilation system failures. That’s why many also consider adding property or equipment coverage to their broader insurance strategy.

For broader manufacturing coverage insights, see our page on Manufacturers Workers Compensation Insurance. Firms involved in adjacent industries may also find our Paint Supply Stores Workers Compensation resource helpful.

Taken together, commercial liability insurance and Workers Compensation insurance protect a powder coating firm from the financial losses of any work site injury suffered by employees, or third parties such as customers or vendors. Both are mandated, and crucial to a company's financial wellbeing.

Frequently Asked Questions

What is Workers Compensation class code 9501?

Class code 9501 is used to categorize businesses involved in painting, powder coating, sign manufacturing, and related processes. It reflects the risk level for Workers Compensation underwriting.

Is Workers Compensation mandatory for powder coating businesses?

Yes, most states require employers to carry Workers Compensation insurance to cover employee injuries or illnesses that occur on the job.

How is my Workers Compensation premium calculated?

Premiums are based on payroll, your industry classification code, and your experience modifier (MOD), which reflects your past claims history.

Can employees be required to contribute to Workers Compensation premiums?

In some states, employees may contribute a portion through payroll deductions, but employers typically cover the majority of costs.

What happens if my company has a high MOD score?

A high MOD score indicates more frequent or severe claims, which can increase your premium. Implementing risk management practices can help reduce future incidents.

Still have questions? Talk to a local insurance expert.