April 2, 2024

4 Reasons to Choose Excess Coverage on Workers’ Compensation Insurance


Gone are those days when a workers’ compensation program was optional. Every US state (except Texas) has made it mandatory for private employers to have a proper workers' compensation scheme in place.

This means employers are required by law to safeguard their employees’ well-being through monetary benefits in the event of an occupational accident or illness. Besides protecting worker rights, this insurance program maintains the employing company’s financial stability.

However, the losses involved in different accidents cannot be accurately estimated. What about cases where the amount far exceeds the employer’s coverage? Without a proper solution, there’s the risk of losing the company’s funds and private resources.

This is where the importance of excess insurance coverage comes in. In this article, we will discuss four reasons why excess coverage on workers’ insurance is beneficial.


What Does Excess on Workers’ Compensation Mean?

According to Prescient National, excess coverage on workers’ compensation is granted to employers approved by a state to be self-insured. By self-insured, we mean the employer will personally bear the losses involved in worker injuries or illness.

Now, the excess insurance policy will handle the aforementioned risk of exceeding the original coverage. It limits the employer’s out-of-pocket expenses for individual accidents as well as the total costs incurred during the policy term.

There are two main types of excess coverage – specific and aggregate. The former places a cap on individual claims, whereas the latter does the same for all injuries that take place during the policy period.


Why Opt for Excess Coverage in Workers’ Compensation

The workers’ compensation market is growing exponentially, at a rate of 4.8%. It will have a net worth of $825.5 billion by 2030. This means more and more companies are implementing this program to promote workplace safety. However, why would any employer want to buy an excess policy? Let’s look at the four main reasons.

Gap Coverage

Self-insured employers enjoy a special privilege in terms of financial flexibility and claims management. On the flip side, this comes with the potential of unlimited liability. In other words, the employer is perpetually at risk of losing exorbitant funds if the workers’ compensation claims exceed the coverage amount.

An excess policy is exclusively designed to fill in such gaps. It puts a cap on individual or aggregate costs, thereby protecting the employer’s financial standing. They must only account for the capped amount in their records.

Safety against Legal Suits

Let’s begin this section by mentioning that certain US states have made excess coverage on workers’ compensation a requirement. This means employers will only be approved for self-insurance if they can prove limited financial burden via an excess policy.

Failing to comply with these mandates can become a violation of the law. Also, with no excess policy, the employer becomes liable for all individual or total costs involved in occupational injuries.

The concerned workers can file a legal suit against the employer unwilling to bear all costs. With excess coverage, the employer need not bear unlimited liability. It protects them against legal struggles.

Market Credibility

This reason for choosing an excess policy is closely tied to the previous one. Whenever a company is dragged into court (no matter the reason), its market reputation is in grave danger. If word circulates that a particular employer is charged for failing to cover occupational accidents, they may lose clients.

This is especially true in today’s day and age, where customers want to know how much a company cares. In fact, 82% of the surveyed admitted that how a brand treats its employees impacted their purchase decisions the most.

No employer wishes to come in their clients’ bad books. Purchasing an excess policy on workers’ compensation is cheaper than risking market credibility.

Attracting and Retaining Talent

In the heat of a legal battle, the customers are not the only ones who withdraw their support from a brand. There is also the danger of increased employee turnover rates. Plus, potential workers/aspirants will become hesitant to apply for a job (regardless of a tempting job description).

When it comes to highly vulnerable industries like warehousing, construction, mining, etc., the best workers often prioritize their safety over other incentives. If an employer is sued for failing to safeguard their worker’s well-being, they will not attract top talent.

An excess policy will cover injury costs without impacting the company’s ability to retain workers even if certain expenses exceed the original coverage amount.


As technology evolves, safety protocols become extensive, and competition increases, workers’ compensation is the need of the hour. Some ways employers can implement a good program include investing in risk management, having provisions for immediate medical care, using data to control losses, reporting injuries immediately, and developing a return-to-work process.






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