3 workers' comp policies for your senior living community

Workers’ compensation is an essential insurance coverage every senior living community needs. There are a few different types of workers’ compensation policies available, so it’s important to know the difference between each one to find the program that best fits your community's needs. Below are three different workers’ compensation policies available through standard markets:

Guaranteed Cost 

A guaranteed cost workers’ compensation policy is one of the most common and basic policies available. With a guaranteed cost policy, the premium is known and will not fluctuate based on claim activity. Some pros and cons of a guaranteed cost policy are:

• Fixed cost is known up front and will only change at the end of the policy based on a payroll audit
  
  
• No collateral is required
  
  
• Claim activity will not have an impact on premium
  
  
• There's not as much risk
  
  
• Experience mods directly impact premium in either a positive (less than 1.0) or negative (greater than 1.0) way

Large Deductible 

A large deductible policy is a type of loss sensitive program where the insured retains a certain amount of each loss up to the per claim deductible or policy aggregate. Here’s what you need to know:

• Significantly lower pay-in than a guaranteed cost policy
  
  
• Collateral is required usually in the form of a LOC
  
  
• Strong risk management programs help control claims and ultimately policy cost
  
  
• Good for cash flow as pay-in is lower and losses are reimbursed on a monthly basis to the carrier, up to the per claim deductible or policy aggregate, as they are paid out which could be over the course of a couple of years; claims are reimbursed to the carrier until all claims are closed out or the aggregate has been reached
  
  
• Potential for a lower ultimate premium than a guaranteed cost policy if claims are kept under control
  
  
• If no deductible aggregate on the policy, the premium could be unlimited

Retrospective Rating 

A retrospective rating policy (retro) is another type of loss sensitive program where the premium is adjusted on an annual basis, subject to a specified minimum and maximum premium, based on the claim activity. Some main differentiators are:

• Up front pay-in is higher than a large deductible, but lower than a guaranteed cost policy
  
  
• Usually little to no collateral is required
  
  
• Unlike a large deductible program where losses are reimbursed as they are paid out by the carrier, the premium is adjusted on an annual basis based on the losses as of a specific date; this can result in a large additional premium being due at one time; the policy is adjusted every year until all claims are paid out, or the policy reaches maximum premium
  
  
• Potential for a lower ultimate premium than a guaranteed cost policy if claims are kept under control
  
  
• Incentive to have a strong risk management program in place to help control claims and ultimately policy cost

Contact your Marsh & McLennan Agency team to learn which workers’ compensation policy best suits your senior living community.