Self-Insured Workers’ Compensation Bond
You’ve probably heard of workers’ compensation, or “work comp.” It’s a form of insurance that provides income replacement and medical benefits to employees injured on the job. But where does the surety bond come into play?
What is a workers’ compensation bond?
A workers’ compensation bond, also called a self-insured bond, is a type of financial guarantee surety bond. It guarantees that an employer will provide workers’ compensation benefits to their employees as mandated by law.
If a worker files a workers’ compensation (insurance) claim against their employer, the bond ensures they will pay it out. They could face a surety bond claim if they fail to make a required payment. If someone files a claim on the surety bond, the surety will step in to pay it out. Then, they will collect the amount paid out from the employer (bondholder).
Get Your Workers Compensation Bond:
Quick Takeaways
- A workers’ compensation bond guarantees that an employer will provide workers’ compensation benefits to their employees.
- If the insurance policy has a high enough deductible and annual premium obligation, the insurance company (or state’s Department of Insurance Regulation) may require a surety bond before issuing a policy.
- If you’re an employer wishing to enter a self-insurance agreement with your state, you may need this bond.
How does a workers’ compensation bond work?
A self-insured workers’ compensation bond is a contract between three parties:
- Principal: The company that offers workers’ compensation benefits to employees
- Obligee: The state department governing workers’ compensation requirements
- Surety: The company that issues the bond
The obligee requires the principal to obtain the bond and abide by its terms. If the principal fails to fulfill their bond obligations – paying out any workers’ compensation claims – they could face bond claims. The bond holds the principal accountable and ensures justice for any claimants.
Who needs a self-insured workers’ compensation bond?
If an insurance policy has a high enough deductible and annual premium obligation, the insurance company (or state’s Department of Insurance Regulation) may require a surety bond before issuing a policy. This applies to employers who wish to self-insure.
- Most states require employers to pay workers’ compensation claims out to employees.
- If you’re an employer wishing to enter a self-insurance agreement with your state, you should consider obtaining a self-insured workers’ compensation bond.
- Your state may require a bond along with the insurance policy to ensure you fulfill your obligations and pay out all valid workers’ compensation claims.
The bond guarantees that the bondholder can fulfill their obligations. In other words, it ensures the employer can pay out workers’ compensation claims that any employees may make against them.
How much does a workers’ compensation bond cost?
The cost of a workers’ compensation bond varies depending on factors such as the:
- Bond amount required
- Contractor’s creditworthiness
- State’s regulations
Generally, contractors can expect to pay a percentage of the bond amount, typically between 1% and 5%, as the annual premium. For example, a $50,000 bond might cost between $500 to $2,500 annually.
Pro Tip: Applicants with third-party CPA-audited financial statements will get the lowest rates.
Frequently Asked Questions
How do workers’ comp bond claims work?
If an employee thinks their employer is withholding workers’ compensation benefits, they can file a claim against the workers’ compensation bond. The surety company will investigate the claim to determine its validity.
If the claim is legitimate and the employer refuses to pay out the claim, the surety company will compensate the injured worker up to the total bond amount. They will then seek reimbursement from the employer, plus interest and fees for covering the claim.
Get a Self-Insured Workers’ Compensation Bond in Your State
ZipBonds offers the fastest and most secure option for getting the surety bonds you need. Our all-digital platform is intuitive and straightforward. Apply online or call us at (888) 435-4191 to speak with an agent directly. We’ll help you get bonded in a zip!
About ZipBonds.com
Founders Ryan Swalve and Zach Mefferd formed the vision for ZipBonds.com when they realized how overly complicated it was to help clients place surety. The frustration of being unable to incorporate the technology they’d used in other insurance-focused projects left them thinking “there has to be a better way.”
Fast forward a couple of years, and that better way is the impetus of everything we do at ZipBonds. We constantly look for innovative ways to improve the bonding process for our clients and agents. Our team comprises individuals who understand all angles of surety – for companies, agencies, and individuals. Incorporating everyone’s point of view to improve the process while simultaneously integrating cutting-edge technology is what sets our business apart.