Most tradies would be familiar with the standard insurance policy where you are made aware of the price of the premium immediately and either pay this amount up front or in installments over the life of the policy. However, things work differently in the case of retrospective rating and it’s good to be aware of this option in case you want to apply it to your business.
Retrospective Rating Explained
A retrospective premium policy means that a determination of the policy holder’s premium is made retrospectively rather than at the time the policy is taken out. This means that a formula is used to calculate how much premium needs to be paid based on the amount of claims paid by the insurer over the life of the policy. This is very different to a standard insurance policy where the price remains fixed. Retrospective rating is most commonly used in the case of worker’s compensation and you’ll generally receive an estimate of what the average costs of premiums are for your policy but the final amount won’t be determined until the expiry of the policy.
Retrospective rating for Worker’s Compensation Cover works best for established businesses who have large worker’s compensation premiums. It would also be best for businesses who are financially stable and have a history of making frequent worker’s compensation claims. Retrospective rating has the advantage of generally costing you less if you reduce your worker’s compensation claims and it can encourage employers to put appropriate safety measures in place to reduce the likelihood of these claims. It also means that you can be assured that your premiums are in line with the actual losses incurred by the insurer specifically for your business rather than relying on the fixed premium amount. However, if a business doesn't take any measures to reduce their risk of worker’s compensation claims and they have multiple claims, they could find that their final premiums are higher than the standard rate.
Speak to Your Broker
Although the standard method of paying premiums upfront for Worker’s Compensation Cover remains the preferred method by most businesses, retrospective rating is an option to consider. If you think this option may suit you and your business, have a chat to your insurance broker for more information.
At All Trades Cover, we’re leading the pack when it comes to offering insurance to tradies at a great price and with the right level of cover. Our friendly staff are trained to deal with the specific needs of tradies and will be able to assist you with insurance for you and your business. Have a chat to one of our brokers if you want to discuss you’re insurance requirements further and we’ll be able to help you find the right insurance package at the right price.
Contact All Trades Cover on 1300 826 850 today to discuss your insurance needs, or for any other questions, and our friendly staff would be happy to help. Our easy online form is also available if you’d like a quick quote.