Having workers’ compensation insurance is a requirement for businesses in most states in the U.S. It’s also a smart business decision for companies looking to save money on liabilities and protect their assets during the time of a claim.
But some businesses may not feel it’s a benefit to pay out lump-sum payments for workers’ compensation insurance premiums as they can take a major toll on your overall business and finances. Instead, there’s an option called pay-as-you-go workers’ compensation that is made to fit your budget and your financial outlook.
Here’s what you need to know about this kind of coverage:
Basics of Workers’ Comp
Workers’ compensation is state-mandated insurance coverage that provides protection for a business if an employee gets sick or injured during their work. These employees receive workers’ comp payments to cover things like medical bills, job retraining, and pay while they’re gone from work.
Most states in the country require that all businesses have some level of workers’ compensation, no matter the industry. Some states, however, allow businesses with a certain number of employees to elect out of coverage. In general, employers can purchase workers’ compensation insurance from a provider of their choosing, whether state or private.
This kind of workers’ compensation allows businesses to make premium payments each time they run their payroll. For this kind of coverage, the insurance liability is spread out throughout the entire year.
Traditional workers’ compensation requires large payments in lump sums to provide coverage for the estimated cost of liability. Pay-as-you-go, on the other hand, allows you to pay the amount based on each payroll. Your premium changes with the addition or subtraction of employees on that payroll.
One immediate benefit of having pay-as-you-go insurance is that it eliminates lump payments, which small businesses, for instance, might not prefer. Making hefty annual payments can put a big strain on a business’s budget. From business locality to industry to employee size, there are many factors that can affect workers’ compensation.
Another benefit is that you pay accurate premium amounts. Traditionally, workers’ compensation premiums are based on estimates. Businesses need to project what their payroll will be for the entire year and pay it upfront. At the end of the year, the provider doles out a refund or asks for further payment.
With this kind of insurance, a business just pays what they owe to the dollar every payroll, cutting out estimating incorrectly and waiting until the end of the year.
Finally, businesses that choose pay-as-you-go insurance can automate workers’ comp payments. With this kind of coverage, your policy provider can automatically collect payments during each cycle, and then the provider takes out the payment automatically without any stress of having to pay on your own.
InsureMyWorkComp is a digital brokerage that helps clients find the right workers’ compensation solution for their business needs. Unlike other online platforms, we will help you to work with an agent who can provide you the right solution for your risk profile. Our staff has over 50 years of workers’ compensation underwriting and sales experience, and we are confident that we will provide you the support that you need. For more information or to get a quote, contact us today at (855) 340-9138.