We often mistakenly believe that the insurance company pays for injury losses and accident costs. This is not true.

Although some companies have guaranteed cost insurance where all losses are covered, many companies have deductible coverage.

• This means that the insurance covers only huge catastrophic losses over the deductible amount, typically $500,000 or one million dollars
• In this insurance arrangement, your company pays for all losses within the deductible amount

  Thus, the company has "retained" the first $500,000 or one million dollars exposure of each loss

Companies that have guaranteed cost coverage with no deductible still need to be concerned about workers' compensation because their premium costs are based on their loss experience, also called their experience modification factor or "mod."

• This means that past history of losses forms the basis of what an insurance company will charge your company for workers' compensation insurance premiums
• In this way, a company's loss history determines how much they will be charged for workers' compensation insurance.

Every dollar you pay for injuries comes directly from your company's bottom line. To determine how much workers' compensation REALLY costs, try our Sales to Pay for Accidents Calculator.

Remember: In addition to the cost of workers' compensation premiums and losses, you also pay for a third-party administrator (TPA) or insurance company to administer claim benefits.

How Losses Are Categorized

Workers' compensation costs fall into three categories -
Incurred, Paid and Reserved.

Paid Losses		Money spent on a claim
Reserved		Money set aside (outstanding) for future payments
Incurred Losses		Combined total of paid plus reserved amounts