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Every employer in Texas needs to know how to compare Workers Compensation Insurance against Occupational Accident insurance. Getting this wrong could wipe out your business and your personal assets. It is an important and risky decision for every business in Texas, every year.
Sometimes unscrupulous insurance agents will say, ‘It’s the same thing as Work Comp except that Occupational Accident is 30% cheaper’. But it’s not. True it is sometimes as much as 30% less costly…but there’s a trade-off for everything in life. And that’s no different when comparing Work Comp to ‘Occ Acc’. (That’s what they call Occupational Accident Insurance in the insurance biz, Occ Acc.)
When it comes to protecting your hard earned assets, Occupational Accident insurance and Workers compensation insurance are two very different cats. Occupational Accident insurance has a fixed limit to the coverage. That means after the insurance runs out they are coming after the money in your mattress. Even worse with Occ Acc your business and personal assets can be frozen the instant an employment claim gets filed with the court.
Every plaintiff’s lawyer knows the first thing to do when filing a lawsuit is find the deepest pockets and grab as much cash as you can. They just find a friendly judge and freeze your cash. In other words they impound your working capital and liquid assets until the case is resolved. It’s almost like blackmail but it’s all completely legal. And, having no access to working capital can stop any company dead in its tracks. Lawyers do this to protect the cash needed to pay that big fat settlement they are hoping to win from you. If you had played it safe with Workers Compensation insurance this could never happen to you or your business.
When a business is protected with Workers Compensation Insurance there is what is called the ‘Exclusive Remedy’. That means that unless there is some gross negligence on your part, claims are capped by the limits of the workers compensation coverage. The lawyers can’t file any other claims against the business. Having Workers Comp eliminates the risk of losing the business or forfeiting your hot rod collection to just pay a judgment.
In 2012, an 18-wheel truck driver named Larry Montoya was dragged by the big-rig he was operating for his employer. The truck was owned by the well known Ben E. Keith Company. If you have ever been on a long road trip I’m sure you’ve seen their trucks. Several years earlier the company had decided to pass on purchasing Workers Compensation insurance. They decided to go cheap with Occupational Accident insurance instead. The jury awarded an injured, but very happy Mr. Montoya $8.6 million US dollars. The award was $7.1 million beyond the limit of the Occupational Accident coverage they had purchased. The company was forced to liquidate assets to pay the damages.
Pros and Cons of Workers Compensation Insurance
- Benefits paid by a state Workers’ Compensation system
- Employee has the burden of proof in a lawsuit
- No payments for pain, suffering or punitive damages
- Backed by a Guaranty Association
- Costs more than Occupational Accident
Pros and Cons of Occupational Accident Coverage
- Costs around 30% less than Workers Compensation.
- Courts can freeze assets to protect future payment of claims.
- Employer has the burden of proof to show innocence. Very Bad.
- Damages for punitive, pain, suffering are all fair game. Larger claims.
- Minimal protection by Guarantee Association.
- Employer pays 100% of claims over policy limits.
- Employee’s legal fees are on the table too.
How can you get the best rate on Workers Compensation Insurance?
Finding cheaper options for employee’s accident coverage can be a real challenge. There are so many options you can explore. Just Google it and you will see. Shopping for insurance rates is about as exciting as a trip to the dentist. It is such a pain in the neck that lazy owners just stick with the same insurance agent. Year, after year, after year… and each year hoping for a better result. Isn’t that the definition of insanity?
Sometimes the right choice between traditional Work Comp and Occupational Accident is ‘neither’. Let me be crystal clear, I am not suggesting you waive off both types of coverage and go-naked. That’s a dangerous place called No Man’s Land. Basically if you have employees, you need to have workplace accident coverage. Even if you live in Texas, it’s just the right thing to do. What I am saying is that there are other less costly ways to get the right coverage in place.
Now this is where it gets interesting. Smart owners have realized that insurance agents actually do very little compared to the big bucks they get paid. Every year like clockwork they pile expensive commissions on top of already expensive premiums. Insurance premiums that are like the ‘anti-gravity’.. they go up and up and never come down. Which means your agent gets a guaranteed raise every year at your expense. No wonder his car is nicer than yours. But the truth is that there is a better way to get coverage you want without the hassles and expense of an insurance agency.
In business everyone knows when things get specialized it’s time to consider outsourcing. Isn’t that why we will fork over 5 bucks for a grande cup of coffee that comes just the way we like it? Its Outsourcing! It’s also the same reason that getting your Workers Compensation coverage from a Professional Employer Organization (PEO) might be the best way.
Just like a law firm that specializes in legal matters, a PEO specializes in employment matters. They are experts in all the endless and sometimes ridiculous administrative functions that come with being an employer. They do this for lots and lots of other employers, who they call ‘clients’. It’s like an on-demand turn key HR solution and it comes with a big master policy for your workers compensation.
The little known secret is that PEOs buy the best coverage, in bulk. They buy it for a lot of employers all at the same time. This eliminates the insurance agent and big fat commissions, year after year. So not only do they have great rates on work comp, but they spread out the risk to keep rates low over time. This can be especially helpful when a business has experienced a few claims that are causing their rates to go up.
That’s why, if your workers compensation premiums have been rising and all the insurance agent can say is ‘sorry’ or ‘would you like to try a higher deductible?’ If that sounds familiar then it might be time to look into PEO. The right PEO can drop the cost of coverage and help keep it down.
Because everybody knows that claims and premiums rise and fall together, PEOs use professional claims managers to keep premiums low. Because it is their business that is on the line too, they have ‘skin in the game’ with you. It always good when the vendor is ‘in-alignment’ with the client’s best interests. That is just how it works with a Professional Employer Organization and workers compensation insurance for your business.
There are a wide range of PEO options that can help get you the best workers compensation insurance and the best rates. If you want to find out the best way to consider which PEOs are right for your business, request a free, no obligation, HR Cost Analysis.