BENEFITS

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  • Advantages of ‘Pay-as-You-Go’ Workers’ Comp
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    Lower Upfront Cost and Competitive Workers' Comp Insurance Costs

    This is often quoted as the biggest benefit to pay-as-you-go workers’ compensation insurance: the ability to avoid a large, cash-flow-killing down payment up front. You can purchase a policy with little money down, and pay your premium in smaller amounts spread over the course of the year.

    That can markedly improve your cash flow—especially when you compare it to traditional workers comp premiums, which typically require you to put down a hefty 25% deposit (based on your estimated annual payroll) and make several monthly installments thereafter. This can put quite a squeeze on your operating cash. Since most employers earn revenue throughout the year, it may make sense to spread an insurance premium payment over the course of the year.

    Reality check: Contrary to some industry hype, pay-as-you-go workers’ comp is not a no-money-down proposition. You will need to pay some cash up front—just not as much.

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    Game Plan

    First things first: Since workers’ comp insurance regulations are state-specific, check your own state’s rules. An excellent resource for state-by-state information on worker’s comp insurance is WorkersCompensation.com. Just click on your state to pull up the information you can use.