What is a Workers Compensation Dividend?

First, when it comes to workers’ compensation policies it’s important to know that some carriers offer more competitive pricing compared to others (that will vary by state). The number of times I’ve heard “we’ll I’ve been with the same carrier for 10+ years because the rate is the rate” is sickening because it simply is not true.

Not only could the rates themself be different but some carriers or safety groups may even offer dividend plans which can also vary from company to company.

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Understanding Your Dividend

When you’re looking into a new worker’s comp policy I would ask:

  1. Does this carrier offer an end-of-year dividend? 
  2. If they offer a dividend, what is the history of that dividend being paid over the last 10 years and when is it paid to the employer (I would ask to see proof of this)? 

A worker’s comp dividend plan is a policy that allows employers to take part in the profits earned by their insurance companies. 

Dividend plans reward employers for having fewer claims which can also help incentivize workplace safety and for many policyholders, dividends are key to managing their workers’ compensation costs.

When Do You Receive Your Dividend

If you decide to move forward with the dividend plan upon your first renewal the insurance company will look over your record and determine if your workers’ comp policy was profitable. This tends to happen around audit time and a board of directors would have to approve the dividend to see if you qualify for it. 

If approved the carrier will issue a dividend check to you, the employer. This will vary depending on the carrier but some carriers may take six to nine months after the policy’s renewal date to issue the check.

It is important to note that dividends are not guaranteed! While it is extremely rare that an insurance carrier does not declare a dividend, carriers do make it clear that it must be approved by the company before it can be issued.

Safety Group Dividends

Here in New York, a common way for a business owner to get on a dividend plan is by joining a safety group that is tailored specifically to the employer’s industry. 

A safety group is employers with similar operations which are combined to help lower the group’s workers’ compensation costs. This spreads the risk from an individual policyholder to an entire group. 

These safety groups usually have a fee to be a part of them however the upfront discount and dividend generally far outweigh the cost of that membership. 

I know there’s a lot here however, if you are interested in learning more about this or if you’re interested in purchasing a new insurance policy, then I would encourage you to reach out to us today via the form below.

Please complete the form below for a quote.

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Are you ready to save time, aggravation, and money? The team at LAF Advisers is here and ready to make the process as painless as possible. We look forward to meeting you!

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