Insurance Policy Glossary

Assigned Risk Plan: An assigned risk workers compensation insurance policy is a policy that supplies workers compensation insurance to businesses that may not qualify for other workers compensation insurance policies due to poor safety records or hazardous conditions. Assigned risk policies exist because the government mandates that businesses carry workers compensation insurance.

Deductible: A deductible is the amount of money you must pay before you are eligible to use funds provided by your insurance company. After your business has paid its deductible, the insurance company will fund the cost of workers compensation insurance claims filed by your employees.

Employer's Liability: Employer's liability insurance shares some similarities with workers compensation insurance. Employer's liability insurance covers the costs incurred by employers that are sued by an employee who becomes ill or is injured on the job. Unlike employer's liability insurance, workers compensation insurance covers workers financial losses so that they do not sue.

Excess Losses:Excess losses occur when the expenses incurred by a worker's job-related injury or illness exceed the amount of money covered by a workers compensation insurance policy or by a self-insurance pool.

Exclusions: Exclusions are whatever is not covered by your workers compensation insurance policy. For example, certain scenarios in which your employees become ill or injured, even if they are job-related, may not be covered by your policy due to reasons such as an employee's willful misconduct.

Indemnity Claim: An indemnity claim is what an employee files in order to receive benefits from a workers compensation insurance policy. An indemnity claim may include the cost of medical expenses, a percentage of lost wages, or the cost of a funeral and benefits paid to dependents in the case of death.

Liability: A liability is a situation your business is legally responsible for or money owed by your business. For example, rectifying a financial loss suffered by one of your employees due to a work-related illness or injury is a liability that is offset by a workers compensation insurance policy.

Limits: Limits are the maximum amount of financial coverage your workers compensation insurance covers. Once costs associated with your employees' work-related injuries or illnesses exceed the limits set by your workers compensation insurance policy, you will no longer receive the benefits set forth in your policy.

Premium: A premium is the cost you pay your workers compensation insurance company in order to receive coverage. You will pay a premium on each employee for whom you need to purchase workers compensation insurance. Premiums will cost more for employees whose jobs have a high level of risk.

Rider (Endorsement): A rider is an extra clause that is included at the end of your workers compensation insurance policy. Riders can be tailored to individual situations that your business may face but that other businesses may not. They are a way of customizing workers compensation insurance policies.

Risk: Risk is how likely you are to file a claim with your insurance company. Businesses whose employees must perform hazardous tasks on the job are classified as having a high risk. The higher your risk, the more you will have to pay to purchase workers compensation insurance.

Short Rate Penalty: A short rate penalty is a fee your business has to pay if you cancel your workers compensation insurance policy before your policy expires. Generally, the short rate penalty expense decreases close to your policy's expiration date, and it is most expensive immediately after you purchase your insurance policy.

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