You may have heard of the new way of paying for your Workers Compensation Insurance; Pay as you go. Now if you are used to the traditional way of paying your premiums, you pay your premium based on an estimated annual payroll that is given to your agent at the beginning of each renewal. You also usually have to pay 20-25% down at every renewal. Oh and let’s not forget those fun Workers Compensation audits that every business owner loves to do every year!

With all of these issues that exist with Workers Compensation Insurance, companies are starting to offer a pay as you go system; let me explain. Instead of paying a down payment when your policy renews, you simply pay a small expense constant (it exists on all Workers Compensation policies) and then only pay insurance premium on the EXACT payroll that you have each pay period. Some companies will require that they also handle the payroll service to make it streamline but more companies are now working with your payroll companies directly. So basically each pay period the payroll for each employee classification is reported to the Insurance Company and then they automatically draft out the exact premium that is owed. At the end of the year there is essentially no audit since there were mini audits every pay period. This type of Workers Compensation has been great for types of business that have seasonal fluctuations in payroll (they don’t pay premium during their slow months) or companies that have grown or downsized (there are no large audit bills or refunds at the end of the year).

It seems in California this has done so well that the State Fund requires their customers to pay their premiums in the pay as you go system. I recently talked to a wholesaler that does pay as you go workers compenstion and he said that they have a 95% retention rate, meaning that when businesses switch to this pay as you go set up they stay with it.

Next time you are renewing or shopping around for your business insurance you may want to ask your agent if they offer pay as you go workers compensation insurance quotes. It could drastically improve your companies cash flow and eliminate a lot of the audit headaches. Of course as always, if you want this quoted from me, don’t hesitate to call. Our agency works with several companies that can offer this for you.

If you want a quote or get an insurance review, please call us at (888) 581-0331, email us at