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Agent's Guide to Workers' Comp

A complete overview of workers' comp in general and working with Texas Mutual in particular.

Deductible Policies

For more information about deductible policies, call (800)859-5995.

Could a Deductible Workers' Compensation Insurance Policy Save You Money?

Why consider a deductible policy?

Some businesses can reduce their workers' compensation premiums by making an agreement with their insurance carrier to share the financial responsibility for expenses associated with worker injuries and illnesses. Under a deductible policy, the carrier and insured business work together to manage claim costs.

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How do deductible workers' compensation insurance policies work?

Four kinds of deductibles are available from Texas Mutual Insurance Co. These deductible programs comply with Texas Department of Insurance guidelines.

  • Per accident deductibles are similar to deductibles on your automobile or homeowner's policy. The policyholder is responsible for the costs of each claim up to the deductible limit.
  • With an aggregate deductible, the policyholder pays the cost of each claim until the total cost of claims meets a specified dollar amount. Then we take over. The dollar amount the policyholder is responsible for is the same, no matter how many claims are filed.
  • Combination deductibles offer both per accident and aggregate deductible limits.
  • Negotiated deductibles are available for policyholders who request a deductible option above that allowed in the other plans, or whose annual premium without deductibles would exceed $100,000.

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How are claims costs paid under a deductible policy?

Under Texas law, as the insurer, we pay all bills associated with claims. Then we bill the policyholder each month for the claims paid which are within the deductible amount. The policyholder must reimburse Texas Mutual Insurance Co. promptly. Failure to reimburse the insurer can lead to cancellation of the policy.

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Would a deductible policy make sense in your business?

That depends on several factors. Most important is the amount of your annual premium. Only policyholders with an estimated annual premium above $5,000 are eligible for the deductible plan option. The lower the premium, the less benefit a deductible plan may bring. If you're interested in a deductible policy, you must also be sure of your financial ability to handle reimbursement of claims paid within the deductible and the administrative paperwork.

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How might a deductible affect your premium?

A few workers' compensation insurance consumers have seen premiums reduced significantly when they chose a policy with a deductible. The effect of a deductible on your premium depends on factors such as the type and size of deductible you choose, your hazard group, and your premium size. The Texas Department of Insurance determines the credits allowed under deductible plans (except negotiated deductibles).

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What deductible amounts are offered?

Texas Mutual Insurance Co. complies with Texas Department of Insurance deductible limits, which differ for each kind of deductible.

Per accident: $1,000 up to $25,000

Aggregate: $2,000 up to $100,000

Combination: $1,000 up to $25,000 per accident, not exceeding $100,000 aggregate

Negotiated: Negotiated and aggregate deductibles are available for employers who request a limit above that allowed in the other plans, or whose annual premium without deductibles would exceed $100,000.

The amount of deductible available to you may be limited by Texas Department of Insurance guidelines which restrict the deductible to a certain percentage of an employer's estimated annual premium.

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What information will we need if you request a deductible?

In addition to your complete application for workers' compensation insurance, we require:

  • your financial statements, audited if available, from the last two years (balance sheet, income statement, and cash flow statement),
  • information about your current workers' compensation coverage and banking arrangements.

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Is a security deposit required?

We require an escrow in the form of cash and/or a letter of credit from a bank approved by Texas Mutual Insurance Co. The letter of credit must contain the wording required by Texas Mutual Insurance Co.

To determine the amount to hold in escrow for a particular policy, the financial data for that business are examined, along with its claim frequency and severity over three to four years, and the type of deductible requested.

The security agreement established between Texas Mutual Insurance Co. and the policyholder defines the calculations used and indicates when and under what circumstances Texas Mutual Insurance Co. will release escrow to the policyholder, and when it may be increased if losses are greater than expected. Escrow is usually released at specified periods over three years.

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Where can you find out more about deductibles?

See your insurance agent, or call our information specialists at (800) 859-5995.

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