If an employee is injured while at work, the employer is required to compensate the employee. States require employers to carry workers’ compensation insurance to cover employee injuries. This insurance can be very expensive, so some employers are minimizing costs through self insured workers compensation programs.
Understanding Self-Insured Workers’ Comp
Traditional workers’ compensation insurance covers employee injury claims in exchange for regular premiums paid by the employer. With a self-insured workers’ comp program, the employer pays employee injury claims from their own funds. In many cases, this arrangement is more cost-effective than traditional workers’ comp insurance.
Acquiring Self-Insured Workers’ Comp
A key step in becoming self-insured is completing a feasibility study, an examination of past claims and premiums that determines if self-insurance would be cost-effective. The next step is completing an application for approval by your state.
If you are approved by the state, you will likely need to purchase excess insurance. This is insurance that covers unusually expensive claims or that helps out in years when there are more claims than expected. Many self-insured companies also select a third-party claims administrator to handle all of the workers’ comp claims.
Workers’ comp insurance can be expensive. However, if you are approved by your state, a self-insured program can save you money.