What Is Pay-As-You-Go Workers’ Comp Insurance?

Cody Cromwell
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How Pay-As-You-Go Workers’ Compensation Insurance Works

Pay-as-you-go workers’ compensation insurance is a great policy option for businesses that want to offer workers’ comp coverage to employees but don’t want to pay for it upfront. In these situations, the employer is charged a higher premium rate, which is based on how much workers’ comp coverage the employer has purchased.

Since the employer pays a monthly invoice for the workers’ comp coverage, there’s no upfront cost to the employer. So, while it may be a little bit more expensive, this method of workers’ comp insurance gives the employer the opportunity to offer coverage without the associated cost.

Even if you’re unsure of how much you want to spend on workers’ comp coverage, it’s a great idea to have it now just in case the worst should ever happen. However, since the risk is spread out over a period of time, you don’t have to spend money now just to be safe.

But more importantly, you want to make sure that all your employees are properly covered and protected if they ever get injured in an accident.

How Pay-As-You-Go Workers’ Comp Makes Premium Audits Easier

Employers and workers in California often agree to a discount on their workers’ compensation premium and at PacificSource Insurance Services Group, we provide a payment arrangement known as a Pay-As-You-Go (PAYG) workers’ comp insurance.

PAYG workers’ comp insurance is the perfect combination of convenience and affordability, as we start your workers’ comp policy by paying your premium in one lump sum and then you just pay us back, month after month.

With PAYG workers’ comp insurance, you don’t have to worry about the hassle of taking time off from work to come into an office. Paying by check or major credit card, you can pay one time and then as you use our services or your injury increases in severity, we will consider picking the cost back up based on your actual needs.

By utilizing PAYG workers’ comp insurance, you can be confident that we will take care of your workers’ comp insurance needs. Our staff will work with you to determine your needs and customize a premium that best suits your budget. With PAYG workers’ comp insurance, the biggest benefit is the peace of mind that comes with knowing all the responsibility is on us.

Pros & Cons of Pay-As-You-Go Workers’ Compensation Insurance

(PAYGO)

Pay-As-You-Go Workers’ Compensation Insurance (PAYGO) is more of an agreement between employers and employees than an insurance policy, but it provides benefits to employees who are injured on the job. PAYGO became state law on April 1, 2014 in Massachusetts. Employers must be certified before they can offer PAYGO.

One of the biggest advantages of Pay-As-You-Go Workers’ Compensation (PAYGO) is that you don’t need to pay premiums monthly. PAYGO is similar to the benefits you would receive under Workers’ Compensation while providing the flexibility of being able to make benefits payments when you need them. There are no limits to the amount of time you pay-in and the amount paid-out for a specific injury.

Pros of Pay-As-You-Go Workers’ Comp

One of the perks of hiring independent contractors or freelancers is the ability to avoid workers’ comp insurance. Why? Because workers’ comp insurance creates a disincentive to hiring independent contractors or freelancers.

Since insurance premiums are based on the number of employees in your business, insurance premiums can be as high as 50% of the gross incomes of most small businesses. And this is keeping in mind that business owners are not allowed to deduct insurance premiums from their taxes.

Drop a hammock in your backyard for the fun of it, enjoy the bug-free summer evenings, and make your child’s dreams come true by renting out a room to your neighbor. Finally, you have achieved your long-held dream of having a good income without working 8-hour days.

Cons of Pay-As-You-Go Workers’ Comp

Pay-As-You-Go Workers’ Compensation Insurance Providers

Workers’ comp insurance is something that most employers offer to their employees. It’s necessary, because under an injury at work scenario, while traditional insurance would cover the medical costs, lost salary, and other costs associated with injuries, workers’ comp insurance would take care of pension and other short-term disability expenses such as therapies. It would also cover basic living expenses and loss of future earnings.

The common misconception about workers’ comp insurance is that it comes free with employer health insurance coverage. However, once the employer pays for the insurance premium, the employee is responsible for all the related costs. But pay-as-you-go workers’ compensation insurance could actually help employees pay a certain amount monthly to cover the incidental and other short-term health expenses related to injuries.

This policy is spread throughout the country; however, the rates are usually similar in each state. Workers’ comp insurance also varies from state to state. It is essential for employees to make sure to note the differences between the state’s designated plan so they can benefit from the best coverage.

The Hartford

EMPLOYERS

A booklet that outlines everything employers need to know about Workers’ Compensation Insurance in Oregon was developed for the insurance industry by ACES.

The booklet is designed so that it can easily be given to employees prior to injury, and it also serves as a helpful reminder of employers’ obligations.

The booklet covers:

  • What is Workers’ Compensation and why do I have it?
  • Which Workers’ Compensation laws apply to your business?
  • What does the Workers’ Compensation Act require of me?
  • Insurance
  • Lawsuits
  • Anything else?

If your business has an employee, you are required to maintain workers’ compensation insurance for that employee.

What is Workers’ Compensation and why do I have it?

Workers’ Compensation is a no win’t no fee benefit provided by the state of Oregon to injured workers.

Both covered (employees) and non-covered (employees) employers are required to purchase and maintain workers’ compensation insurance. The coverage is required unless a specific exception is met.

AmTrust Financial

Services provides Workers’ Compensation Insurance as a PAYG (Payment and Assumption Option) system. The PAYG is a self-funded, third party administration program. The program follows the current federal guidelines and helps business owners and corporate managers to reduce administrative and operating costs through one-stop shopping.

We understand that employers seek to become more competitive as a way to operate efficiently and competitively. Eliminating or lowering costs and expenses can be achieved in a variety of ways. A key aspect in that process is to cut back on the time-consuming and highly volatile portion of insurance administration known as the policyholder’s agent’s function.

An AmTrust Worker’s Compensation Program alleviates the following administrative tasks as a cost saver to large and small business owners as well as sole proprietors:

{1}. Employers are relieved of the time-consuming and frustrating administrative tasks that go along with the Worker’s Compensation program for their business.
{2}. Employers benefit by not having to worry about:

A. Selecting an insurance company.

B. Evaluating carrier products and services to find the most compatible solution.

C. Data entry

D. Reviewing and evaluating policies

Employers can focus their management and business activities on more strategic goals and issues.

Travelers

You may have heard of Travelers workers’ comp insurance, but do you know how it works? And do you know about other, more affordable options for workers’ comp insurance?

In order to keep your business running smoothly and prevent you from having to shut down for long periods of time, when you need workers’ comp insurance, it’s important that you make sure the policy is tailored to fit your needs. And with workers’ comp insurance, that’s especially true since the options are pretty much endless.

You should have workers’ comp insurance if you employ any workers, full- or part-time, even if they are just helping out in your business. The important thing is that you need to look at how much responsibility you have when it comes to the safety and well-being of your employees. For example, is it up to you to ensure that electric equipment is de-personalized and that chemicals are handled appropriately? These are just a couple of things that you may find yourself responsible for when it comes to your workers’ safety.

Pay-As-You-Go Workers’ Compensation Insurance Example

Here’s an example of how Pay-As-You-Go (PAYG) Workers’ Compensation insurance works.

Jim owns a cafe and employs several workers. He is a self-employed (sole proprietor) and he chooses workers’ compensation insurance for his business. The policy that he purchases qualifies him to use the PAYG option.

Since the policy does not provide coverage without payroll, Jim withholds the premium payments from his employees’ paychecks. He makes it a point to collect the premium payments on time. Although to the employees, it looks like they are paying their portion of the premium on time, Jim knows that the payments were actually withheld from the employee’s paychecks.

Jim pays the premium payments on time and maintains good communication with the insurer. This allows him to use the –pay-as-you-go” option.

As long as Jim maintains his coverage with the insurer, he is able to cycle his coverage to a new policy when his current policy expires.

Bottom Line

While many people who buy business insurance are fearful of making the first step in an expensive process, Business Owner’s Policy insurance may be exactly what you need. Like fire and theft insurance, this form of insurance protects your company from the financial costs of certain emergencies. And unlike homeowners insurance or car insurance, the premiums for Business Owner’s Policy will be very low. One of the best aspects about Business Owner’s Policy is that you have the ability to pay for your coverage over time to ensure more than one deductible is covered. This helps to protect your company if one claim becomes too expensive to handle. And since your premiums can be paid over several years, Business Owner’s Policy is effectively a form of insurance that reduces your financial risk.