Employer Liability Insurance Calculator

Plan coverage using practical workplace risk inputs. See projected costs, limits, and deductible impacts instantly. Export results, share with stakeholders, and negotiate smarter renewals.

Regional legal and cost level adjustment.
Higher risk classes increase expected loss severity.
Used to scale expected claim frequency.
Benchmarks limits and payroll-based pricing.
Optional: supports sanity checks for payroll.
Example: 0.80 means 0.8 claims per 100 employees.
Average cost per claim before adjustments.
Trends severity by one year.
Higher score reduces expected loss (model factor 0.75–1.25).
Reflects loss history vs expected (e.g., 0.90 better than average).
Caps covered severity per claim.
Caps insurer loss cost over the year (simplified).
Retained amount per claim before insurer pays.
Adds legal/adjusting costs to expected loss.
Underwriting + acquisition + admin loading.
Adds target margin on top of loss and expenses.
Credits for training, audits, and prevention programs.
Applied as a surcharge on premium.
Varies by location and program.
Installments may slightly increase total cost.
Used for a secondary pricing benchmark.
Reset
Tip: Enter your best estimate of claim frequency and severity. If unsure, start conservative and run multiple scenarios by adjusting limits, deductibles, and safety score.
How to use this calculator
  1. Choose your jurisdiction and industry profile for risk adjustment.
  2. Enter headcount and payroll to scale exposure and benchmarking.
  3. Set claim frequency and severity using internal or broker data.
  4. Pick limits and deductible that match your risk appetite.
  5. Adjust safety score and experience modifier to reflect history.
  6. Review the premium, compare the benchmark, and export results.
Formula used
This tool uses a transparent, scenario-based loss-cost model with a payroll-rate benchmark.
Expected Claims = (Employees / 100) × FrequencyPer100
Trended Severity = Severity × (1 + Inflation)
Adjusted Severity = TrendedSeverity × IndustryFactor × JurisdictionFactor × SafetyFactor
Covered Severity = min(AdjustedSeverity, PerClaimLimit)
Retained = ExpectedClaims × min(Deductible, CoveredSeverity)
Covered Loss = ExpectedClaims × CoveredSeverity
Defense = CoveredLoss × DefenseCostPct
Insurer Loss Cost = min(max((CoveredLoss + Defense − Retained), 0), AggregateLimit)
Pure Premium = InsurerLossCost × ExperienceModifier
Loaded Premium = PurePremium × (1 + ExpenseLoad + Profit)
Final Premium = LoadedPremium × (1 − RiskDiscount) × (1 + BrokerFee + Taxes + PaymentSurcharge)
Blended Estimate = 70% × FinalPremium + 30% × PayrollBenchmarkPremium

Exposure and payroll scaling

Employer liability cost scales with exposure and payroll. A team of 25 employees with $1,200,000 payroll represents $48,000 average wage. If staffing rises to 40, exposure increases 60%, and expected claims rise proportionally under the same frequency assumption. Payroll also drives limit planning; a starting point is 20% of payroll, then rounding to market limits.

Frequency and severity assumptions

Frequency is entered as claims per 100 employees per year. Using 0.80, 25 employees produce 0.20 expected claims annually. Severity starts at $45,000 per claim and is trended by inflation. At 6% trend, trended severity becomes $47,700 before risk adjustments. Industry and jurisdiction multipliers then adjust severity; construction at 1.60 raises modeled severity 60% before safety.

Limits, deductibles, and retained risk

Per-claim limits cap covered severity, while deductibles shift losses to the employer. With a $25,000 deductible, the retained portion per claim is the smaller of deductible and covered severity. When expected claims are 0.20, expected annual retained cost is about $5,000 before fees. Aggregate limits cap annual insurer loss cost; $2,000,000 limits extreme modeled years. Higher deductibles often reduce premium, but increase volatility in retained cash flow.

Expense load and fee components

The calculator converts loss cost into premium by applying expense load and profit, then surcharges for broker fees, taxes, and payment plans. For example, a 35% expense load plus 5% profit increases pure premium by 40%. A 3% broker fee, 2.5% taxes, and 1% payment surcharge then increase the discounted premium by 6.5%. Risk management discounts reduce premium after loading; a 5% discount on $10,000 saves $500.

Scenario testing and governance

Use the benchmark payroll rate to sanity-check assumptions quickly. A rate of $0.25 per $100 payroll implies $3,000 base premium before multipliers. Compare this to the loss-cost estimate and reconcile differences by adjusting frequency, safety score, or experience modifier. Review the sensitivity chart to see premium moves with limits and deductibles. Document scenarios, export CSV or PDF for reviews, and update inputs quarterly.

Example data table
Scenario Employees Payroll Freq/100 Severity Limit Deductible Safety Est. Premium
Baseline 25 $1,200,000 0.80 $45,000 $1,000,000 $25,000 75 $9,850
Higher Limit 25 $1,200,000 0.80 $45,000 $2,000,000 $25,000 75 $10,120
Better Safety 25 $1,200,000 0.80 $45,000 $1,000,000 $25,000 90 $8,980
Example premiums are illustrative, not quotes.
FAQs

1) What does employer liability insurance typically cover?
It commonly addresses employee injury lawsuits outside standard workers’ compensation, including negligence allegations. Coverage terms vary by insurer, jurisdiction, endorsements, and policy limits.

2) Why do limits and deductibles change the estimate?
Limits cap what the insurer may pay per claim, while deductibles shift part of each loss to you. Higher deductibles usually reduce premium but increase retained costs.

3) How should I choose claim frequency and severity?
Use your loss runs, incident logs, and broker benchmarks. If data is thin, test multiple scenarios and focus on worst‑case sensitivity using higher severity and trend.

4) What is the experience modifier in this tool?
It is a multiplier reflecting prior loss performance relative to expectations. A value below 1.00 improves the estimate, while a value above 1.00 increases it.

5) Why is there a payroll-rate benchmark?
Some pricing approaches start with payroll exposure and class rates. The benchmark helps sanity‑check the loss‑cost model when claim assumptions are uncertain.

6) Is this output a binding premium quote?
No. It is a planning estimate for budgeting and option comparisons. Actual pricing depends on underwriting review, legal environment, coverage forms, and negotiated terms.

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