The Benefit and Drawback of Self-Insuring Worker’s Compensation
The decision to self-insure for worker’s compensation claims is a difficult one, largely because self-insured employers are responsible for work comp claims within their businesses. There are multiple reasons an employer may choose to self-insure, but there are risks and drawbacks to this method as well. Knowing the most significant pros and cons will help you decide what is best for your company.
The Main Benefit
When employers choose to self-insure, the main factor in their decision is savings. Instead of paying large monthly premiums to an insurance company, the business can keep that money for the occasion where a worker’s comp claim may actually arise. This allows higher-volume cash flow to remain within the business. The self-insured employer also has more control over the intricacies of how claims are handled and how money for claims is managed.
The Main Drawback
The most significant drawback for a self-insured employer is the risk of large losses due to a legitimate claim. Without an insurance provider, there is no limit to what the employer pays before someone else takes over. The employer is solely responsible to pay what is due. According to the insurance experts at Caitlin Morgan, some employers may choose to obtain excess coverage for claims over a specific amount. However, this option has its own set of drawbacks if an employer is trying to avoid payments to an insurance company to begin with.
Working with a reputable insurance company will help you make the decision about whether or not to self-insure for worker’s compensation claims.