Guaranteed cost vs. loss-sensitive workers’ compensation

With a guaranteed cost workers’ compensation policy, your premiums are fixed during the policy period. They’re based on projected payroll and classification codes—not on actual claim outcomes. Every workers’ compensation policy is audited at the end to be rated off actual payrolls.

Guaranteed cost workers’ compensation plans offer:

• Predictable premiums: Employers know their costs upfront, regardless of claim frequency or severity.

• Simplified administration: Claims are handled by the insurer with minimal employer involvement.

• Accessibility: Often the best fit for small to mid-sized businesses seeking financial stability.

• Premiums may be higher over time compared to loss-sensitive programs if your business has a strong safety record and low-cost or infrequent claims.

Loss-sensitive workers’ compensation programs tie a portion of your premium to your actual claims experience during the policy period. In other words, the safer your workplace is and the fewer claims you have, the more you may save.

• Cost savings potential: Businesses with effective safety programs may see lower overall costs.

• Incentive for safety: Direct financial benefit for reducing claims.

• Flexibility: Options include small and large deductible plans, retrospective rating, and self-insured retention structures.

• Variable costs: Premiums can rise significantly after costly claims.

• Greater responsibility: Requires financial stability and risk management resources to absorb variability.

• More complex administration: Employers may need to be more actively involved in claims management.

The decision between guaranteed cost and loss-sensitive workers’ comp depends on several factors:

• Small businesses often prefer guaranteed cost plans because of their simplicity and predictability.

• Larger businesses with strong financial foundations and robust safety programs may benefit from loss-sensitive plans, where they can reap the financial benefits of fewer, less severe claims.

Your industry risk profile and comfort with variability also play key roles.

At Sentry, we recognize that no two businesses are alike. That’s why we offer both guaranteed cost workers’ compensation and a variety of loss-sensitive options, including retrospective rating insurance, small- and large-deductible plans, and self-insured retention. We’ll work with you to determine the best fit for your goals, risk tolerance, and long-term strategy.