Self-Insured Workers' Compensation

A self-insured (also known as self-funded) workers compensation plan is one in which the employer assumes the financial risk for providing workers comp benefits to its employees. Self-insurance is an alternative to purchasing a workers comp insurance policy. An employer that is self-insured for workers comp pays the cost of each claim out of pocket, as they are incurred, instead of paying a fixed premium to an insurance carrier or to a state-sponsored workers comp fund.

Potential benefits that an employer may derive from a self-insured workers comp plan include:

  • cost effectiveness,
  • greater control over their claims programs,
  • and increased safety and loss control management.

To receive self-insured status, employers must qualify through an application process, meet specified requirements, and be approved by the applicable state regulatory agency. The application and approval process varies by state, and a small number of states do not allow employers to operate self-insured workers comp plans. In order to be approved, employers typically need to meet specified financial requirements and provide a variety of documentation.

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