Workers’ Compensation Catastrophe Cover
What Does Workers’ Compensation Catastrophe Cover Mean?
Workers’ compensation catastrophe cover is a form of reinsurance that an insurance company obtains to protect itself against significant losses resulting from a catastrophe or a series of events that cause injuries to multiple workers. This coverage helps limit the financial impact on the insurer in the event of multiple claims under a workers’ compensation policy, which typically covers medical expenses and lost wages incurred due to job-related accidents.
Because workers’ compensation insurance pays out per worker injured, a single accident affecting many employees at once can produce claim totals far beyond what an insurer planned for, which is the gap catastrophe cover is meant to fill.
Insuranceopedia Explains Workers’ Compensation Catastrophe Cover
Workers’ compensation catastrophe cover protects insurance companies against the financial impact of a disaster or event that results in multiple claims. In response to the events of September 11, 2001, the insurance industry reevaluated and enhanced this type of coverage to mitigate its impact in case of large-scale incidents.
Alternatively, some employers choose to self-insure rather than purchasing workers’ compensation insurance for their employees. In such cases, they may still purchase catastrophe coverage to help cover claims that exceed the funds they have set aside for this purpose. Larger employers weighing whether to self-insure or buy a standard business insurance program often factor catastrophe cover into that decision, since one bad event can wipe out years of premium savings.
