As a form of self insurance, a deductible rating plan lets you pay a lower up-front premium because your organization will actually pay for its own losses up to the deductible. As losses occur, the insurer pays the claim, and then bills you for the amount of the loss plus service fees for losses within the deductible. Your business, in turn, reimburses the insurer.
Large Deductible
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| How It Works |
The Hartford analyzes past losses at your organization.
- We identify trends based on loss history, open claims, changes in benefit levels and other variables.
- We then calculate your expected losses for the coming year and negotiate a per-loss deductible to cover expected losses.
- We negotiate a premium and settle all claims as usual.
- Periodically, you pay for losses and claim-handling expenses, up to the deductible limits.
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| Types of Organizations That Typically Use a Large Deductible Plan |
A large deductible plan may be the right insurance solution for organizations that are interested in:
- deferring cash outflow;
- lowering business insurance costs;
- assuming some risk for their losses; and
- actively working to control accidents at their business.
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| Pros and Cons |
- You pay for losses as they occur, not up front, as in a guaranteed cost plan.
- You pay a lower premium since you pay for losses within your deductible (by reimbursing your insurer)
- You gain an opportunity to realize and invest savings immediately, not months or years later.
- Your business assumes responsibility for losses.
- Your ultimate cost is directly related to the effectiveness of your risk management efforts.
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| What The Hartford Offers |
- Flexibility to design your program to your specific requirements.
- Industry-leading cost-containment measures which can help you target exposures and initiate proven techniques to control losses.
- Wide variety of deductible levels and plans to choose from, including pre-funded and step-down deductibles.
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Pre-Funded Deductible
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| How It Works |
- You pay an initial loss deposit to The Hartford in installments.
- The Hartford then pays actual deductible losses from this cash deposit.
- Depending on your losses, The Hartford adjusts your cash deposit up or down every year.
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| Types of Organizations That Typically Use a Pre-Funded Deductible Plan |
Financially sound organizations that:
- want lower business insurance costs and easier administration;
- have a comfort level in the predictability of their losses;
- can assume some risk for their losses; and
- actively control losses.
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| Pros and Cons |
- Does not require you to produce letters of credit, forms of collateral or surety bonds because you prepay expected losses.
- Instead of cutting monthly checks for losses, you get a monthly statement showing claim activity which makes for easier administration.
- Your ultimate cost is directly related to the effectiveness of your risk management efforts.
- Can be used with your workers' compensation, general liability and commercial auto coverage.
- Cannot unbundle claim services to non-Hartford claim handler.
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Step-Down Deductible
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| How It Works |
- You receive a premium credit for retaining a higher deductible that applies to a small number of the largest claims (from 1 to 10) per policy period.
- Then the deductible steps down to a lower deductible level which is applied to all other claims during the policy period.
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| Types of Organizations That Typically Use a Step-Down Deductible Plan |
A step-down deductible may be the right insurance solution for businesses that:
- like the idea of receiving a premium credit in return for greater risk retention, but worry about incurring a higher-than-expected number of large losses; and
- implement risk management and onsite safety programs to prevent losses.
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| Pros and Cons |
- Lowers your premium while capping the increase in your risk retention.
- Lowers your retention level for most claims without substantially increasing your premium.
- Offers flexibility since it can be used with any loss-responsive program, including: retro, self-insured retention or captive insurance plan.
- Must implement and monitor a safety program.
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