Workers compensation insurance, often called workers comp, is essential for protecting both employees and businesses. However, for many companies, rising premiums are a significant financial burden. Fortunately, there are strategies to reduce these costs through discounts, credits, and dividend programs.
What is Workers Compensation Insurance?
Workers compensation is a state-mandated insurance program that provides benefits to employees who suffer work-related injuries or illnesses. In return, employers typically receive liability protection from workplace injury lawsuits.
What Does Workers Compensation Insurance Cover?
- Medical expenses (hospital visits, surgeries, and rehabilitation)
- Lost wages (temporary and permanent disability benefits)
- Job retraining (vocational rehab if employees can’t return to their previous jobs)
- Death benefits (payments to dependents in fatal cases)
How Can I Lower Workers Compensation Insurance Costs?
Many businesses overpay for workers compensation insurance simply because they aren’t aware of available discounts, premium reduction strategies, and refund programs. Here are some cost-saving opportunities:
Premium Discounts and Credits
Many states and insurance providers offer premium credits and discounts for businesses that implement strong safety programs, maintain a drug-free workplace, and provide return-to-work programs.
Safety Program Credit
Businesses with written safety policies, OSHA-compliant training, and accident prevention programs may qualify for premium credits.
Some states offer up to a 10% reduction in workers compensation costs for companies that pass a safety audit.
Drug-Free Workplace Credit
Many states offer 5%–10% premium discounts for businesses that maintain a certified drug-free workplace program.
To qualify, companies must implement pre-employment drug testing, random testing, and post-accident screening.
Return-to-Work Program Credit
Companies that offer light-duty or modified-duty assignments to injured workers can receive workers compensation premium reductions.
These programs also help reduce lost-time claims, which directly impact your Experience Modification Rate (EMR).
Experience Modification Rate (EMR) Discounts
EMR is one of the biggest factors in determining workers compensation premiums. A lower EMR means lower costs.
Businesses with few workplace injuries and strong safety programs can qualify for an EMR discount, leading to significant savings.
Managed Care Program Discounts
Some insurance companies offer discounted workers compensation premiums for businesses enrolled in Managed Care Networks (MCNs).
MCNs help control medical treatment costs and streamline claims management, reducing overall workers compensation expenses.
Workers Compensation Dividend Programs Help You Get Money Back
A workers compensation dividend program is a profit-sharing incentive that returns a portion of your workers compensation premium if your company maintains low claim costs.
How Do Dividend Programs Work?
- The business pays its standard workers compensation premiums.
- At the end of the policy term, the insurance provider reviews the company's claim history.
- If the company has low claims, it receives a dividend payout (refund).
Types of Workers Compensation Dividend Programs
- Guaranteed Dividend Programs – A set percentage of your premium is refunded, regardless of claims.
- Sliding Scale Dividends – The lower your claims, the higher your refund percentage.
- Group Dividend Programs – Available to industry-specific businesses, such as construction, trucking, and manufacturing.
Example Workers Compensation Savings with a Dividend Program
| Annual Workers Compensation Premium | Dividend Return % | Money Refunded |
|---|---|---|
| $100,000 | 10% | $10,000 |
| $250,000 | 15% | $37,500 |
| $500,000 | 20% | $100,000 |
Effective Practices to Reduce Workers Compensation Claims and Lower Costs
One effective way to lower workers compensation insurance costs and qualify for dividends and premium discounts is to proactively manage your workplace risk. Here are some tips to help you get started:
Strengthen Workplace Safety Programs
- Implement OSHA training and workplace hazard assessments.
- Hold regular safety meetings and provide incentives for employees who follow safety guidelines.
Implement a Return-to-Work Program
- Create light-duty job options for injured employees to return to work sooner.
- This also helps reduce lost-time claims, which impact workers compensation costs.
Monitor and Manage Claims Efficiently
- Report injuries immediately to prevent fraudulent or exaggerated claims.
- Work with preferred medical providers who specialize in occupational injuries.
Lower Your Experience Modification Rate (EMR)
- Proactively manage claims, focus on accident prevention, and work with your insurance agent to ensure open claims are closed quickly.
- The lower your EMR, the lower your workers compensation premiums.
Our dedicated team is here to help you implement these strategies and navigate cost-saving options for your business.
Save Money on Workers Compensation Insurance
Companies that take advantage of premium credits, safety discounts, and dividend programs can significantly reduce their costs and even earn money back.
Want to explore these options for your business? Contact us today for a free consultation.
Download Telly’s Complete Guide to Solving the Mystery of Expensive Workers Compensation Claims
Have questions? Contact:
Telly Longhurst
Insurance Advisor
Call: (435) 752-1351Book an Appointment»
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