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A workers’ compensation deductible plan has become a more popular option among contractors. Whether it is a small or large deductible plan, this plan may allow premium savings to your company that can help control your workers’ compensation costs. Continue reading to learn what workers’ compensation deductible plan might work best for you!
Small Deductible Plans
Even though a small deductible plan is available in most states, it’s not as common. Each state has its own rules and regulations pertaining to workers’ compensation deductibles that can be found through the specific state or the NCCI. Typically, these plans apply to medical only, indemnity only, or both medical and indemnity.
A small deductible plan is not much different than any other deductible concept, as the insurer pays the entire claim on a dollar basis and then seeks reimbursement from the insured. This reimbursement can happen on a monthly or quarterly basis. The reduction in premium can vary from state to state when a workers’ compensation deductible is implemented but ranges between 0.1% and 59%.
Depending on the state, this discount can be applied before or after the application of the experience modifier. Deductibles can range anywhere from $100 to $75,000, and this range varies based on the state.
A large deductible plan is a cash flow workers’ compensation program that allows the insured to retain a portion of each loss through a substantial deductible and to transfer onto an insurer losses in excess of that deductible. It is designed specifically for larger companies that have the capacity and risk appetite to shoulder some risk and be responsible for a portion of their losses.
The deductible for these plans can range from $100,000 to $1,000,000 per occurrence. These plans are offered in majority of states and are attractive to contractors that would otherwise consider retrospective rating plans or self-insurance.
In a large deductible plan, the insurer bills the insured a premium that includes expected losses in excess of the deductible, claims expenses, non-loss related expenses—such as state boards, bureaus, and taxes—as well as insurer profit, all over the course of a policy term. The insured will be required to post collateral to secure their ability to reimburse the insurer for deductible loss payments.
To learn if a large deductible plan makes sense for your company, reach out to TSIB today for a free Risk Management Review!