Certain workers' compensation policies, in particular for high-risk businesses, can be difficult to maintain. Non-renewals are a constant problem for brokers and small businesses alike, with one of the most common causes for non-renewal being premium thresholds that are simply too high to afford and require an active annual renewal process.
However, there is a way to avoid non-renewal with an alternative to the standard workers' comp policy. A pay-as-you-go model allows you to work through a PEO for workers' comp coverage that has no high annual premium threshold renewal to worry about — no renewal headaches.
Take a closer look at the details on pay-as-you-go workers' comp below and discover the advantages it can bring.
Non-standard workers' comp models can offer a lot to small businesses and brokers who are looking to avoid the need to make calls and encourage renewals in a high-risk business. Rather than needing to find new policies or risk losing their current policy, brokers and small businesses can take an approach that is more appealing to both workers and the businesses that employ them.
Standard workers' compensation policies can be a significant investment, especially for smaller companies. Traditionally, workers' comp premiums require a 25% deposit based on your total annual payroll, and that is a substantial chunk of change for any growing company that needs to make every dollar count.
With a pay-as-you-go model, the money you put down is much less from the outset, which frees a lot more cash for your other business expenses. While these non-standard programs still require a down payment, it is significantly less than what you would expect. Because your company will be earning revenue throughout the year, it makes more sense for the payments to be split up over the course of the year rather than requiring such a large deposit — and sticker shock — up front.
Workers' compensation premiums are calculated similarly for both standard and non-standard payment options. The overall cost will be based on the company's history of claims, the industry they're in, total payroll, and more. The state the company operates in also plays a potential role in certain industries where a state fund is a common choice for workers' comp coverage.
While workplace accidents can be very damaging to people and property, not every claim is the result of a catastrophe, but claims can still lead to non-renewal. While non-renewal is not the same as cancellation due to the policyholder doing something wrong, it may still happen after certain kinds of claims impact the policy. Some insurers may also choose to simply stop covering a category of claims or change their coverage due to new regulations. With a pay-as-you-go model, this is less likely to impact your business because you are making your payments for insurance on a month-to-month basis in most cases.
SPLI is a PEO company that has worked with countless clients to find workers' comp solutions. We have seen the pay-as-you-go model work well for many businesses, and it could be perfect for yours as well. Get in touch with our team to learn more about everything we can offer.