While worker’s compensation laws vary state by state, coverage is required for most employers. For businesses operating in states that allow self-insurance, this can be an attractive option. Here are a couple of questions you should ask to determine if it is the right choice for your business.
Is Your Business Financially Stable?
When you choose self-insured workers’ compensation coverage, you are legally responsible for all costs associated with workers’ comp claims. Those can be legal and medical bills as well as replacement wages while a covered employee is unable to work. Your business must be able to absorb these costs, even if there is a large claim or several over a short time period.
Are You Comfortable With the Risks Associated With Self-Insured Groups?
One way to avoid being fully responsible for the cost of a claim is to join a self-insured group. This is a small number of businesses in the same or similar industries that operate as a single insured. When one has a claim, they share the responsibility for payment. This can help mitigate risks, but also presents a few new ones. For example, if one company fails to pay on its own claim, the other members are legally responsible for the costs.
Self-insurance carries benefits, but it also comes with its own set of risks. Be sure to examine your comfort level with those risks before deciding whether it is the right choice for your company.