why Higher Workers Compensation Coverage Limits May Make Sense for Colorado Businesses
Protecting your company when the unexpected happens
Colorado law requires virtually every employer with one or more employees to carry workers’ compensation insurance. This applies whether the workers are full-time, part-time, seasonal, or even family members. The requirement exists to ensure injured employees receive medical care and wage replacement benefits, while also giving employers the important legal protection known as the exclusive remedy.
Most business owners correctly focus on having the required coverage in place. Far fewer take a close look at the limits on the Employers’ Liability portion of their policy — and that is where a meaningful gap in protection often exists.
What the Policy Actually Covers
A standard Colorado workers’ compensation policy has two main parts:
• Part One – Workers’ Compensation covers the statutory benefits required by Colorado law (medical treatment, temporary and permanent disability benefits, death benefits, etc.). These benefits are defined by the Colorado Workers’ Compensation Act and are essentially unlimited for reasonable and necessary medical care.
• Part Two – Employers’ Liability protects the business itself when an employee (or their family) brings a claim that falls outside the exclusive remedy protection of the Workers’ Compensation Act. These situations are less common, but they can involve third-party-over actions, dual-capacity claims, certain allegations of negligence, or other rare scenarios where the business faces a lawsuit.
The standard Employers’ Liability limits on most policies are typically:
• $100,000 bodily injury by accident (each accident)
• $500,000 bodily injury by disease (policy limit)
• $100,000 bodily injury by disease (each employee)
These limits have remained relatively unchanged for decades even as claim severity, medical costs, and litigation expenses have risen.
Why Higher Limits Are Worth Considering
Catastrophic workplace incidents — a serious multi-employee accident, a high-value third-party claim, or a complex lawsuit — can generate defense costs and potential judgments that quickly exceed the standard $100,000 / $500,000 limits. When that happens, the business’s own assets can be exposed.
The good news is that increasing these limits is usually inexpensive relative to the protection gained. Moving from the standard limits to $500,000 / $500,000 / $500,000 or even $1,000,000 limits typically adds only a small percentage to the overall workers’ compensation premium — often well under 2%, and in many cases only a couple of hundred dollars per year. For most employers the incremental cost is modest compared with the potential financial exposure of a large claim.
Higher limits also help in practical ways:
• Many larger clients, general contractors, and municipalities require higher employers’ liability limits as a condition of awarding work.
• An umbrella or excess liability policy can sit over the higher employers’ liability limits, creating a stronger overall liability program.
• Peace of mind: knowing the business is better protected if a rare but severe claim occurs.
The Bottom Line for Colorado Employers
Having the required workers’ compensation coverage is non-negotiable. Choosing appropriate limits on the employers’ liability side is a separate, important decision that many businesses overlook.
Because the cost of higher limits is relatively low, it usually makes sense to explore the options. A short conversation with your agent can show you exactly what the difference in premium would be for your specific payroll and class codes, and whether higher limits (or an accompanying umbrella) fit your risk tolerance and contractual requirements.
Welsh Insurance Agency has been helping Northern Colorado businesses with workers’ compensation and commercial coverage since 1987. We work with multiple carriers, including Pinnacol Assurance and private market options, so we can shop the market for both competitive pricing and the right limits.
If you would like a no-obligation review of your current workers’ compensation policy — including the employers’ liability limits and any potential cost to increase them — contact us:
• Loveland office: 970-663-5404
• Fort Collins office: 970-206-1810
• Online: www.wiainsurance.com
We shop. You save. And more importantly, you get coverage that actually protects the business you’ve built.