Workers’ compensation insurance is required in every state, and it can add up to a considerable expense for certain businesses. In some areas, companies have an option to self insure. There are benefits to this approach, but there can also be drawbacks. The following tips can help you uncover the intricacies of self-insured workers’ comp so you can make an informed decision about whether it is the right choice for your company.
Principles Behind Self Insurance
Self-insurance is not available everywhere, but it is an option for businesses in a growing number of states. Where allowed, companies generally must adhere to strict regulations and prove a certain level of financial stability to ensure claims will be covered. Self-insurance can be done by individual companies or several can form a self-insurance group to share costs and liability.
Benefits of Self Insurance
There are many benefits to self-insuring, including:
- You control the entire process from risk management to filing, managing and paying claims
- Payments are only made if there is a claim. There also tend to have lower administrative costs.
There are also potential drawbacks, which are enough to dissuade some businesses from avoiding this route. They include:
- The threat of a single, large claim or multiple smaller claims over a short period of time
- Insufficient knowledge about legal or medical matters
- A lack of understanding about claims administration
Ultimately, each business must decide if self insurance is a good choice. Taking knowledge, financial stability and legal options in your area into consideration can help you make that determination.