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Workers Comp Embedded Insurance For Small Business Can Backfire


Workers Comp Embedded Insurance Program To Other Policies

Can Workers Comp embedded insurance cause problems later?

When I was looking over the usual morning publications that I read for story ideas, I came across a great interview on embedded insurance from AM Best.  Do you subscribe to their daily newsletter?  If not, you may want to put it on your list.  I watched a video on embedded insurance plans.  I was not familiar with the definition.

pic of excalibur workers comp embedded insurance
Wikimedia Commons – Louis-jardim

I found a great article on embedded insurance here.  I  used to call it affinity selling.   I could find nothing on workers comp embedded insurance programs.  I thought I would add my comments.

Yes, I am slightly changing the definition to make Workers Comp an add-on to many micro and small business insurance policies offered by insurance agencies.

Definition of Embedded Insurance

The definition of embedded insurance is “when a non-insurance entity distributes an insurance product.”

Two examples are:

  1. Buying travel insurance when you purchase an airline ticket online
  2. Extended warranty insurance


I have bought embedded insurance when traveling a few times.  I had to file a claim once.  The carrier reimbursed my travel expenses within 15 days due to being stranded internationally.   During the pandemic, I bought travel insurance constantly.

Workers Comp Embedded Insurance on BOP Policies

BOP or business owners’ policy applications always contain a section on whether you want to add Workers Comp coverage to a BOP.   A few states require Workers Comp coverage for almost any sized company.  Even sole proprietors may have to provide coverage for themselves.

Ghost policies are not recommended as states have recognized this type of policy as possibly premium evasion if your company has employees.

Where The Problem Begins With Workers Comp Embedded Insurance

We see this problem occurring very often.  If workers comp is sold as an extra coverage (embedded insurance) many times the premium may be very small.

We usually receive this type of inquiry once per week or more.   The insured added Workers Comp to their insurance package – usually BOP- without paying attention to their class codes.   The Workers Comp policy seems like a bargain until the premium audit occurs 30 – 60 days after the policy expiry.

What seemed to be a bargain, is now a $20,000+ bill – often for uninsured subcontractors.  We then receive a call or email inquiring why the bill was so unexpectedly high.

Way To Avoid This Situation

Workers Comp may be offered to your company as a type of embedded insurance.  Even though the BOP policies may be lengthy when other coverages are added, take the time to pull out your Workers Comp policy and at least review the Declarations Page.

If the declarations page and class codes do not describe what you do, check with the agent that wrote you the policy.

Workers Comp embedded insurance may not be a popular term until you receive a final policy bill.

Bottom Line – make sure you know what you are buying when you obtain Workers Comp coverage.


Also Read: General Liability Insurance Premium Audits Definition

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James J Moore - Workers Comp Expert

Raleigh, NC, United States

About The Author...

James founded a Workers’ Compensation consulting firm, J&L Risk Management Consultants, Inc. in 1996. J&L’s mission is to reduce our clients’ Workers Compensation premiums by using time-tested techniques. J&L’s claims, premium, reserve and Experience Mod reviews have saved employers over $9.8 million in earned premiums over the last three years. J&L has saved numerous companies from bankruptcy proceedings as a result of insurance overpayments.

James has over 27 years of experience in insurance claims, audit, and underwriting, specializing in Workers’ Compensation. He has supervised, and managed the administration of Workers’ Compensation claims, and underwriting in over 45 states. His professional experience includes being the Director of Risk Management for the North Carolina School Boards Association. He created a very successful Workers’ Compensation Injury Rehabilitation Unit for school personnel.

James’s educational background, which centered on computer technology, culminated in earning a Masters of Business Administration (MBA); an Associate in Claims designation (AIC); and an Associate in Risk Management designation (ARM). He is a Chartered Financial Consultant (ChFC) and a licensed financial advisor. The NC Department of Insurance has certified him as an insurance instructor. He also possesses a Bachelors’ Degree in Actuarial Science.

LexisNexis has twice recognized his blog as one of the Top 25 Blogs on Workers’ Compensation. J&L has been listed in AM Best’s Preferred Providers Directory for Insurance Experts – Workers Compensation for over eight years. He recently won the prestigious Baucom Shine Lifetime Achievement Award for his volunteer contributions to the area of risk management and safety. James was recently named as an instructor for the prestigious Insurance Academy.

James is on the Board of Directors and Treasurer of the North Carolina Mid-State Safety Council. He has published two manuals on Workers’ Compensation and three different claims processing manuals. He has also written and has been quoted in numerous articles on reducing Workers’ Compensation costs for public and private employers. James publishes a weekly newsletter with 7,000 readers.

He currently possess press credentials and am invited to various national Workers Compensation conferences as a reporter.

James’s articles or interviews on Workers’ Compensation have appeared in the following publications or websites:

  • Risk and Insurance Management Society (RIMS)
  • Entrepreneur Magazine
  • Bloomberg Business News
  • WorkCompCentral.com
  • Claims Magazine
  • Risk & Insurance Magazine
  • Insurance Journal
  • Workers Compensation.com
  • LinkedIn, Twitter, Facebook and other social media sites
  • Various trade publications


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