New Hampshire is one of many states that allow insurance companies to set up pay-as-you-go billing systems for workers comp insurance policies. For many small businesses, this type of arrangement offers multiple advantages.

What Is the Difference Between NH Workers Comp Insurance and Pay-as-You-Go NH Workers Comp Insurance?

Pay-as-you-go worker's compensation insurance in NH is the same as worker's compensation insurance from a coverage standpoint as other state-approved worker's compensation policies offered in New Hampshire.

Pay-As-You-Go Charges Workers Comp Premiums as Payroll Is Paid

The difference between traditionally charged workers comp policies and pay-as-you-go policies lies in how the two types of policies are paid.

The premium for worker's compensation insurance is estimated upfront at the time of purchase, based on estimated payroll.  This estimate determines the downpayment and installments.  A payroll audit is conducted at the end of the policy term, and premium adjustments are made as necessary. As a result, a business will be billed more if premiums were underpaid, or it'll receive a refund if premiums were overpaid.

With pay-as-you-go workers' compensation, premiums are typically paid as payroll is doled out. Each payroll period, the appropriate workers' compensation premium is calculated and paid to the insurer. An insurer may still conduct a pay-as-you-go policy audit when the policy terminates.  Still, significant adjustments are much less likely because premium calculations are made throughout the policy period.

This new billing setup has been made possible primarily thanks to technological advancement. Before payroll was made almost entirely electronically, calculating premiums each payroll period was too cumbersome, and businesses had to make large upfront payments. Now that payroll can be made online, it’s easy to automate the calculation and payment of worker's compensation premiums whenever payroll is paid.

The Advantages of Pay-As-You-Go Worker's Compensation Insurance

For many businesses in New Hampshire, pay-as-you-go workers comp offers two significant benefits.

1. Businesses can usually avoid having to make a large upfront payment when they purchase a pay-as-you-go worker's compensation policy. This benefits any business, but it’s crucial to new businesses and seasonal ones. If a new and seasonal business has employees, they must purchase worker's compensation before sales even start and when cash is at a premium. Reducing cash flow concerns when just starting out or uncertain is extremely helpful.
   
2. The likelihood of significant overpayment or a major premium adjustment is reduced. This helps maintain more consistent books, so businesses can better see where their finances actually stand.
   
3.  Uncertainty is reduced.  No matter how steady a business may be, uncertainty can be a factor, as seen in 2020 with COVID-19. Many companies overestimated their payroll and hence overpaid their worker's compensation premium. The businesses that took a hit in sales had to wait for an audit and return premium from the carrier. When business was significantly down, it would have been better to have the cash on hand.

Find Pay-As-You-Go Workers Compensation

Many insurance companies now offer pay-as-you-go workers comp policies, and it’s still important to compare all policy options when purchasing this insurance. 

An easy way to compare pay-as-you-go worker's compensation policies against one another is to work with an independent insurance agent specializing in this type of coverage. An independent agent can request policy quotes from multiple insurers in the state since independent agents aren't bound to one company. In addition, someone who's also particularly familiar with these workers' compensation policies will be able to help you quickly and accurately compare the details of various options.

To speak with an independent insurance agent about pay-as-you-go workers comp insurance, contact HPM Insurance. Our agents have helped many businesses with this and traditional worker's compensation, and we’d be happy to help!