How Businesses Can Shield Against Excessive Insurance Claims

It is the responsibility of an employer to provide workers with insurance coverage for workplace accidents. Insurance is especially necessary for industries that, by nature, present high-risk work environments (e.g., construction, electrical and plumbing services, roofing services, agriculture, horticulture, manufacturing). After all, accidents can happen to the best of us, even employees who are meticulous about safety protocols and process SOPs.

Employees and workers are not the only ones who need protection from workplace incidents and accidents, though. Businesses need financial protection, as well. Small and self-insured businesses, in particular, need coverage in case the insurance claims of their workers exceed their policies’ limits.

Insurance that covers businesses for excess insurance claims is called excess workers’ compensation.

What Is Excess Workers’ Compensation Insurance?

In an ideal situation, third-party insurance policies that cover workers’ compensation would pay for the compensation claims of employees who become injured in any way while on the job. Not all businesses have mammoth policies, however. Many have limited coverage, which means if the compensation claims exceed what the regular workers’ insurance can provide, the company or employer will have to pay for the rest of the claims.

Excess workers’ compensation insurance protects businesses from financial hardship due to excessive insurance claims. It is recommended especially to self-insured firms in high-risk work environments that may not afford it if many employees get injured and file for compensation within a short time frame. Excess workers’ compensation also helps self-insured businesses in the unfortunate event that an incident will result in permanent disability or death (these are the “catastrophic claims” that could be too expensive for a self-insured business’ limited financial reserves).

Insurers of excess workers’ compensation insurance often offer extra benefits to self-insured employers, too. With Midlands as your carrier, you can look forward to the following benefits and supplementary services:

  • Underwriting guidance
  • Risk management
  • Guidance in workplace safety protocols
  • Guidance in emergency planning and preparation
  • Assistance in fulfilling regulatory requirements
  • Catastrophic claims management solutions

Layer Upon Layer of Coverage

What’s interesting about excess workers’ compensation insurance is it’s not unlimited; if you exceed the limit on this insurance, you will need another policy to cover the excess in compensation claims.

Suppose your company is insured for up to $500,000 of workers’ compensation claims (first layer of coverage). You want to protect the company’s finances in the rare event that several incidents or one major incident will occur, and the compensation claims will exceed the half-a-million coverage your policy provides. So you purchase excess workers’ compensation insurance (second layer) to cover your company financially. Your insurance provider will also set a cap on how much they are willing to pay.

Assuming that this insurer guarantees $1 million coverage over the $500,000 of your regular workers’ comp insurance, your company will be exposed to comp payments that exceed $1,500,000. If you want to protect your company further, you have to purchase another excess workers’ comp insurance policy (third layer) to cover compensation costs over $1.5 million. That’s how it works.

Be Prepared for the Unplannable

Workplace accidents are unpredictable. Moreover, they can negatively impact a business, from a tarnished reputation to financial turmoil. Ethical responsibility dictates that employers compensate workers who sustain injuries on the job. However, it would be unfortunate if adherence to this responsibility would also end in financial disaster for your business.

Avoid suffering financial losses and denying your workers the compensation they deserve.

Let’s talk about your excess workers’ compensation needs. Contact Midlands today.