Workers Compensation Bonds
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What you need to know about Workers Compensation Bonds
Workers compensation bonds (also known as self insurer’s bonds) are legally binding agreements between three parties: companies offering workers compensation to their employees, the local government agency responsible for regulating workers compensation, and a surety company.
The government agency is the Obligee and establishes the obligations that the company (the Principal) must follow. The surety (also called bonding company) issues the bond guaranteeing the performance of the company.
Most states require employers to provide for payment of workers compensation claims to its employees by either obtaining insurance or a certificate for self-insurance. Employers who choose to self-insure are often required to post a surety bond to ensure workers compensation claims are paid.
When the surety company issues the bond, they provide a guarantee that the company’s employees will receive payment for valid workers compensation claims even when the employer can’t pay or chooses not to.
If the employer fails to pay the claims, the surety will pay the employees what is owed, up to the bond amount. The employer is liable for the losses and is legally required to reimburse the surety company for any damages paid under the bond.
Workers compensation surety bond costs vary depending on the total bond amount and the premium rate. The government agency sets the required bond amount and the surety company determines your premium rate, which is the percentage of the total bond amount you pay as the premium.
Premium rates for workers compensation bonds typically cost between 2% and 8% of the total bond amount. During the application process, the surety company evaluates your credit score, financial strength, and industry experience. Applicants with good credit generally receive the lowest rates, however, bad credit will not prevent you from securing a workers compensation bond. EZ Surety still offers competitive rates to individuals with low credit scores or other financial issues.
You’ll know if you need a surety bond because some entity will have required you to obtain one. They must also inform you of which specific bond type you’ll need. There are thousands of bonds across the country, all of which vary by state and industry.
Visit EZSuretyBonds.com to browse hundreds of bonds by state, type, or industry.
