Workers’ compensation insurance is a necessity for businesses to protect themselves from claims related to worker injuries. For companies in riskier industries, such as construction or distribution, workers’ comp is all but required by state and local governments. But this kind of coverage isn’t one-size-fits-all and can be personalized to fit the needs of a company.

This is where Pay-as-you-go work comp insurance comes into play. Pay-as-you-go worker’s compensation is an insurance payment plan that bases your premium on your actual payroll. This is different from traditional workers’ comp plans that use projections to determine your overall costs and result in an extra bill at the end of a policy. Choosing this kind of option minimizes this risk and lets companies spread premium payments throughout the calendar year. 

Pay-as-You-Go Workers’ Comp Defined

Pay-as-you-go workers’ comp makes costs more manageable for companies and sometimes doesn’t require a down payment or monthly fees. Insurers that offer this kind of workers’ comp adjust your premium every time you run payroll. They usually do this in one of two methods.

First, there’s self-reporting, which has companies send their payroll information to insurers. This usually requires uploading or entering data into an online platform hosted by the insurer. Then there’s payroll integration, which lets insurers and payroll companies automate a pay-as-you-go plan. The payroll company shares the client’s data with their insurers so it can calculate a premium and withdraw the amount.

Both of these methods result in more accurate workers’ compensation premiums. Plus, pay-as-you-go workers’ compensation helps a company’s cash flow because they don’t have to make a sizeable down payment or pay the entire premium at once.

Pros

There are a handful of positives when it comes to obtaining this kind of insurance. One is a lower upfront cost, as mentioned above. Without a sizeable down payment, clients can save as much as 25% on their premiums.

Pay-as-you-go also eliminates premium financing. Business owners who choose this kind of coverage seldom need premium financing because most providers don’t require a large down payment, and the monthly payments are typically more manageable.

Pay-as-you-go also provides more accurate premiums as insurers base premiums on actual payroll. This keeps more money in the client’s pocket that they can use in other areas of their business.

Cons

As much as this kind of worker’s comp choice is beneficial, it does come with some downsides. Not every plan is the same, so it’s important to understand its potential setbacks.

First, there are potential budget issues. Opting for automatic payments with pay-as-you-go coverage may cause smaller businesses to pay less attention to their costs. Business owners need to always keep in mind that hiring staff members adds both payroll and insurance costs immediately, for example.

Next, there are limited choices in coverage. Payroll companies, for instance, may work with only select insurers, so business owners who get this kind of worker’s comp coverage don’t have an opportunity to compare rates.

The bottom line is that a pay-as-you-go workers’ comp plan can be very beneficial to your company, especially if you want a more manageable insurance bill and fewer risks at the end of a policy term.

About InsureMyWorkComp & Their Workers Comp Solutions

InsureMyWorkComp is a digital brokerage that helps clients find the right workers’ compensation solution for their business needs, such as occupational accident insurance. Unlike other online platforms, we will help you to work with an agent who can provide you the right solution for your risk profile. Our staff has over 50 years of workers’ compensation underwriting and sales experience, and we are confident that we will provide you the support that you need. For more information or to get a quote, contact us today at (855) 340-9138.