Assuming the Risk of Self-Insurance for Workers Comp

Workers compensation plagues the mind of any business that involves dangerous activities for employees. These employers understand all too well that they are responsible for any potential injuries that may arise while working. With this said, the majority of businesses purchase workers compensation policies from traditional insurance providers to mitigate this risk. However, some companies choose self insured workers compensation instead of reaching an agreement with an insurance company. Employers that want this route must remain conscious of the risks associated with assuming this type of responsibility. Companies must cover the cost of any injuries suffered by employees instead of relying on an insurance organization to bail them out.

Risks of Self Insurance for Workers Comp

The first risk associated with self insured workers compensation involves a single large claim occurring during a rough period for the business. Since the business won’t have the policy to lean on, they must foot the bill to remain compliant with existing workers compensation laws. Another risk involves a large number of claims that happen to occur in the same fiscal year. While this is an unlikely scenario, it is a possibility and one of the reasons why workers compensation policies exist in the first place. To mitigate these risks, it is not out of the question for companies to purchase excess workers compensation insurance as a supplemental policy.