Self-Insured Workers Compensation

It is the responsibility of each employer to comply with state regulations with regard to compensating employees for workplace injuries. Most employees do this by purchasing standard workers compensation policy but employers that self-insure and pay their own claims are still required to abide by state law.

Employers that self-insure have to be approved by the state. Each state has to be convinced that the employer, in the absence of a standard policy of workers compensation, will be able to take care of any employees that suffer workplace injuries. Information that is typically required includes audited financial data, prior workers compensation experience, information about any safety and / or loss information as well as general information about the company. Another important piece of information that is required is who the administrator will be. As companies are unused to paying claims, as this function is normally performed by the insurer, they outsource this function to professional companies who are known as Third Party Administrators. Assuming that the employer is approved they will normally be required to post a bond or a financial guarantee with the state so that in the event of the employer is unable to pay its claims, the bond or guarantee can be drawn down on to pay claims. This is especially important for Workers Compensation as many claims such as occupational disease and cumulative trauma only come to light several years after a policy has been purchased.