Exploring Workers Compensation Alternatives

Workers compensation is a system designed to take care of sick and injured employees while protecting their employers from costly lawsuits. It is a form of insurance developed to put an end to workplace animosity and foster harmony between the two camps. However, it is not a perfect system by any means. Some states have made it mandatory but others allow certain businesses to operate without it. For example, Texas companies may opt out of it if they pass the requirements. Most do so to reduce their expenses because the premiums are substantial. These companies may still get a form of protection from cheaper workers compensation alternatives.

Captive Insurance

Business owners can get creative by forming their own insurance company. Given the enormity of this task, it is usually available only to the biggest organizations with large capital to satisfy the regulatory requirements. They can use this in-house insurance company to protect the interests of various business ventures. With such a setup, they can mitigate risks while increasing the upside. Profits do not go to a third party insurance provider. It goes back to your company including those from investment incomes.


Some employers choose to fund the workers compensation program themselves. They take charge of earmarking a substantial amount of money to fund any related needs. If workers file claims, then the payouts will come from this fund. Why do businesses do this instead of letting others assume the risks? Perhaps they are confident that the payouts will always be much less than what they would have paid to an insurer. By keeping money to themselves, they reduce expenses while having the power to do anything they want with the difference. Compare previous years’ premiums and claims to see if this is worth a try.

Deductible Plans

In this model, the insurance company offers deductibles that exceed the $100,000 mark. This is a high limit that effectively passes much of the financial responsibility from the insurer to the employer. The insurance company will only step in if the total cost of the claims breach the agreed deductible amount. Although this is a risky arrangement, it can substantially lower the monthly premiums which saves a great deal of money on a recurring basis. This can be used for more productive endeavors such as equipment acquisition and expansion with tangible returns. Less money is wasted while more of it helps the business grow.

Dividend Plans

If you are an employer who invests in the safety of your workplace, then you could use this diligence to save on your workers compensation insurance payments. Dividend plans actually reward your behavior. There is a ratings system that identifies those businesses that were able to control their losses by making workplace safety a top priority. They are given dividends for their efforts which effectively allows them to share in the profits of the insurer. Make sure that you understand how these dividends are calculated so that you know just how much you can save. Some of these plans are better than others.