Is a Workers' Comp Self-Insurance Program Right for Your Company?

September 3, 2019

three male construction workers reviewing plans outside at jobsite

image credit: Dima Sidelnikov/shutterstock.com

Workers’ compensation self-insurance programs are risk management techniques where a firm sets aside a pool of money to provide for any unexpected losses that occur. This is done instead of purchasing a third-party insurance program, also known as a fully-insured plan. So, instead of paying worker’s compensation premiums, that money is earmarked for this special fund to pay for any claims that are incurred.

There are different types of workers’ comp self-insurance available to your company.


Individual Self Insurance

This insurance requires an employer to pay an injured worker’s benefits. To maintain being individual self-insurers, employers must continue to meet the self-insurance program’s requirements—which includes certain solvency standards.

This approach may be more cost-effective than buying insurance from a third party. The more predictable and smaller the loss, the more economical sense it makes to be self-insured. Since a third-party insurance company’s goal is to make a profit by charging premiums in excess of expected losses, a self-insured company should be able to save money by simply setting aside the money that would have been paid out as insurance premiums.

Such programs are handled differently in each state. However, North Dakota and Wyoming do not carry this type of insurance.

If individual workers’ comp self-insurance is not the right fit for your company, then an employer can apply for group self-insurance.

Group Self-Insurance

As the name implies, this is self-insurance that is jointly granted to an entire group rather than to individual entities. The sponsors of the group may determine who is eligible to join based on group bylaws. This program allows individual employers to form a group so everyone is covered under worker’s compensation. It is only offered in 37 states, and each group can only work in one state.

Each state varies in how they offer group self-insurance. Some might require groups to be from the same or similar industry. Others may require groups to have a specific amount in worker’s compensation. However, all 37 states require that each group plans for how they will use the insurance for approval.

TSIB can help pick the program that’s right for you. For more information on self-insurance programs, you can either visit TSIB’s website or contact us at 201-267-7500. 

Stop paying more than you should for Workers Compensation insurance

Topics: Workers' compensation, commercial insurance

Written by The TSIB Team

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