Self Insured Work Comp

Should You Self-Insure Workers' Compensation?

(Time to talk about the facts)


Workers' compensation insurance can seem a bit confusing and maybe even unnecessary if you have deep pockets as an employer. However, being able to pass the buck to a trusted insurance company as a partner can be a nice thing. 

Your independent insurance agent is the best resource and go-to when it comes to the pros and cons of self-insuring your workers' compensation insurance. 

What Is Workers' Compensation Insurance?

Workers' compensation insurance is a policy taken out by the employer that pays for medical expenses and partial wages of an employee or included owners if they get injured or ill as a result of work or their working environment. 

This covers things like:

  • Medical expenses for bodily injury that are incurred while at work or working 
  • Mental illness healthcare expenses if proven that the mental illness was a result of problematic working conditions
  • Physical illness medical expenses if proven that the illness was a result of problematic working conditions

What Is Self-Insured Workers' Compensation?

Self-insured workers' compensation is when you, as the employer, decide that you don't want to obtain private or state insurance coverage and go at it on your own. This means that you will be responsible for any and all medical bills, employee wages and the like while the injured or ill employee is out of commission. 

Some larger corporations and subsidiaries have decided to take it upon themselves to pool their efforts together forming their own bank of funds to utilize in the event that there is injury or illness as a result of working. This type of self-insured workers' compensation policy is used because some employers prefer the idea of not paying their premiums up front prior to a workers' compensation claim and instead just paying for the claim out of pocket as the need arises. 

This can be a pretty risky move to make from an employer standpoint. Workers' compensation claims can go on for the lifetime of the employee or claimant if disability kicks in. That means that you would be responsible for wages and medical expenses for an unforeseen period of time, and likely decades.

Nearly 6,000 business owners or corporations take part in a self-insured workers' compensation plan, which is a pretty low percentage when you know that there are 5.9 million businesses in the US alone and growing. 

Costs of Self-Insured vs. Workers' Compensation Insurance

The costs of a self-insured plan vs. a workers' compensation insurance policy can be astronomically different. There is no real way of knowing the price difference because each workers' compensation premium is different and each self-insured claim amount varies. 

What can be determined are the up-front premiums you would pay on a workers' compensation policy that are set for the annual policy term, so no surprises there. The self-insured claim that you would have to pay out of pocket could be any amount large or small. The out-of-pocket expenses could go on for years unless you have a really good lawyer that could make a deal with the claimant. 

The real question is, are you willing to take the chance of self-insuring? Discussing the pros and cons of having a self-insured plan vs. a workers' compensation policy with your independent insurance agent is the first step and just a plain good idea.

Claims Process for a Self-Insured Workers' Compensation Plan

The claims process is pretty cut and dry and it goes like this:

work comp claims
  • Step one: Your employee, partner, or executive gets injured, ill, or suffers mental anguish while on the job or as a result thereof. 
work comp claims
  • Step two: You pay out of pocket for all their medical expenses and continue paying their wages. If they are unable to return to work due to a disability, they can sue you for the years of expenses. If they die, their family or friends could sue you. In fact, anyone at any time could sue you and you'd have zero protection from a workers' compensation policy or an employers' liability policy
workers' comp

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Claims Process for a Workers' Compensation Insurance Policy

The claims process for a workers' compensation insurance policy through your independent insurance agent is also pretty cut and dry and it goes like this:

  • Step one: Call your independent insurance agent when you need to file a workers' compensation claim due to an injured or ill employee or included owners, executives, and partners.
work comp policy
  • Step two: An assigned insurance adjuster calls and gets all the facts and reports it back to the insurance company for processing and final determination of payout. 
work comp claims policy
  • Step three: The insurance company cuts you a nice check for all covered claims.

The Benefits of An Independent Insurance Agent

When it comes to your workers' compensation policy, the benefit of independent insurance agent is that they're an extension of your business. Think of them as another employee or consultant that is a part of your team making sure you have all the coverage you need and handling your commercial insurance claims as they arise. 

With an independent insurance agent, you can delegate the protection of your company to another party who is knowledgeable, licensed, and working with your best interests in mind. What more could you ask for?

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United States Census Bureau. Statistics of U.S. Businesses. (2019).