Workers’ compensation dividends are designed to pay the insured business a return premium, given the loss ratio meets a required percentage. The loss ratio is defined as the comparison of premiums paid to losses incurred.
Only some insurance companies that provide workers’ compensation offer dividend plans. The two most common dividend plans are a flat-dividend plan and a sliding-dividend plan. There is also a less common combined dividend plan, also known as a loss-ratio plan.
The following further explains each type of dividend plan:
Flat-Dividend Plan: Returns a flat percentage of the premium to those policy holders that are eligible; typically 5 or 10 percent.
Sliding-Scale Dividend Plan: The size of the dividend will depend on the insured’s loss ratio.
Combined Dividend Plan: Combines both a flat dividend plan and a sliding –scale dividend plan
Keep in mind, dividends are not guaranteed, and will not be paid out until the completion of the policy audit. In addition, there must be no outstanding premium and the premium must have been paid on time, in order to be considered to receive the dividend.