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Glossary · PA Workers' Comp
Large Deductible Workers' Comp
A workers' comp structure for large employers where the insured pays all claims costs up to a per-claim deductible, reducing premium but increasing retained loss exposure.
Definition
A large deductible workers' compensation policy is a structure used by larger employers in which the insured company agrees to pay all workers' comp claim costs up to a specified per-claim deductible (often $100,000–$500,000+), with the insurer covering losses above that threshold.
Large Deductible Workers' Comp: How It Works, the Collateral Requirement, and Who It Fits
The insurer still handles claims administration and pays all claims initially — the deductible is then billed back to the employer. This maintains the insurer's claims-handling expertise and regulatory compliance while shifting a portion of the loss financing to the employer.
Large deductible programs significantly reduce the insured's premium because the carrier's retained risk is much lower. In exchange, the employer carries significant financial risk for losses within the deductible band.
Large deductible programs are typically accompanied by collateral requirements — letters of credit or cash deposits held by the insurer to secure the employer's deductible obligation. This collateral can tie up significant capital.
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