Entrepreneurs rarely get a day off. As an entrepreneur, your life is a never-ending cycle of difficult decisions.
Amidst everything, one crucial aspect often slips under the radar: protecting your business from unexpected financial strains. And no, we’re not just talking about funding but workers’ compensation.
Workers’ compensation is essential for every business. However, for a lot of companies, standard workers’ comp might not be enough, especially if they operate in a high-risk industry.
According to the National Safety Council, construction, education and health services, agriculture, forestry, fishing and hunting, and transportation and warehousing ranked among the most dangerous industries in 2022.
Injuries in these industries are far more costly than planned. How do you safeguard your business against these potentially devastating expenses? That’s where excess insurance comes in. It’s like a safety net that covers high-stakes claims that could otherwise throw your finances off balance.
Here, we’ll walk you through how excess insurance for workers’ compensation can benefit your business.
What is Excess Insurance?
According to IRMI, excess insurance is a policy that protects the insured against certain hazards and applies only to damage or loss in excess of a predetermined sum. In other words, it covers a claim after the original insurance limit has been used up or exhausted.
For instance, let’s say your primary insurance policy has a coverage limit of $50,000, and you have an excess policy that provides an additional $25,000 in coverage. If a claim comes in at $60,000, the primary insurance would reimburse $50,000. For the remaining $10,000, the excess policy would step in.
In business, excess insurance is like a backup for your standard workers’ compensation policy.
Talking about this policy, Prescient National explains that excess workers’ compensation covers claims above the specified dollar amount. That is, if an accident happens and the costs go beyond that amount, excess insurance will cover the rest. This protects businesses from both unexpected catastrophic losses and unexpected frequency of losses.
4 Reasons to Add Excess Insurance to Your Workers’ Compensation Coverage
Here’s why you must consider excess insurance for workers’ compensation:
1. Protection Against Unpredictable Claims
In the unfortunate case of a major accident—a factory mishap or a severe fall on a construction site—the medical costs, ongoing care, and potential settlements can skyrocket. The OSHA estimates that employers solely pay $1 billion per week for direct workers’ compensation costs.
Even with a solid workers’ compensation policy, claims can disrupt your business finances. That is because standard coverage usually has a limit, which can be exhausted surprisingly fast if things escalate. Once that limit is reached, the rest of the costs could fall on your business.
Excess insurance is a way to protect your business from these high-cost situations. When a claim exceeds the limits of your primary workers’ comp policy, excess insurance will handle the additional costs.
2. Cost Savings in the Long Run
Insurance is all about balancing risk and cost. It might seem like you’re spending extra by getting excess insurance, but it often leads to cost savings over time—how you ask.
Excess insurance tends to be more affordable than paying out of pocket for massive claims or raising the limits on a standard workers’ comp policy. You’re essentially buying financial stability by making sure you don’t face unexpected and unmanageable costs.
Hence, it acts as a financial cushion, absorbing the strain of a large claim so your business can maintain stability.
3. Risk Management Made Easy
Adding excess insurance to your workers’ compensation strategy will make it easier to handle risk management across the board.
One major claim can seriously disrupt your cash flow, especially in industries like construction or manufacturing, where accidents are often more frequent and costly. Excess insurance covers costs that go beyond your standard policy limit, so you’re financially ready for high-stakes situations.
What’s even better is that many excess insurance providers offer risk assessment tools and safety consulting as part of their packages. They help you spot potential hazards, improve workplace safety, and ultimately reduce the chance of costly claims.
4. Enhanced Security for Your Workforce
It’s not just about covering the what-ifs for your business. Employees want to know whether they will be taken care of if something goes wrong.
You’re not just covering the basics when you opt for excess insurance. But you’re also showing your employees that you’re invested in their safety and well-being.
When your team knows there is an extra layer of protection, it builds trust and loyalty. They feel valued and reassured.
This extra security can be a big plus when hiring and retaining top talent. Skilled workers look at more than just salary; they care about a company’s commitment to safety.
No one wants to think about worst-case scenarios. But the reality is that accidents do happen.
Excess insurance can help you prepare financially for those unplanned moments. It’s an added cost upfront, but it’s a smart strategy to protect your business from the financial strain of unexpected, high-cost claims. After all, planning for the unexpected is never a bad move.
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