Employers in California usually must carry workers’ compensation insurance because the law requires it. This insurance protects the employer and employees in the event of an on-the-job accident. The state does, however, offer another option of self-insuring. This allows you to opt out of the state program for your own insurance set up. Most recently, this includes the newly adopted Workers’ Compensation Alternative Security Program.
According to the Insurance Journal, your previous alternative to carrying a worker’s compensation policy through the state program was to deposit money into an account that was equal to your potential liabilities. This could put a hardship on your business if you do not have a lot of working capital.
The ASP removes the deposit requirement. Instead, the ASP handles the deposit for you. In return, you pay a participation fee. How much you pay depends on your credit risk. Because you do not have to deposit your money, you can use it instead to grow your business.
Of course, deciding which option will work best for you depends largely on your situation and the costs involved. You may find going with the traditional insurance option is more cost-effective, but in may cases using the ASP can be financially better. For some, putting down the deposit makes the most sense.
You should compare the costs of each option to see which will work out for your business. In the end, you want to do what makes financial sense so you can continue to see success with the growth and advancement of your business. This information is for education and is not legal advice.