Glossary

Large deductible program

A policy where the insurer pays claims and then bills you for losses up to a high per-claim deductible, in return for lower premium and secured collateral.

Also called: large deductible plan, large deductible workers' comp, LDP, large deductible policy

A large deductible program is a guaranteed-cost alternative for employers that want to keep part of their own losses without self-insuring. It is most common in workers' compensation and also used for general liability and auto liability. The deductible is large, commonly $100,000 or more per claim, and the insurer pays claims from the first dollar, then bills the employer to reimburse the amount inside the deductible.

Because the insurer carries the risk that the employer cannot reimburse, it requires collateral, usually a letter of credit sized to expected unpaid deductible losses. Premium is lower than a first-dollar policy because the insurer expects to pay only losses above the deductible. State premium taxes and assessments are often lower as well. The employer typically pays a claims-handling fee or hires its own third-party administrator.

Say an employer has a $250,000 per-claim deductible (a hypothetical). A $180,000 claim is reimbursed in full by the employer, while a $600,000 claim costs the employer $250,000 and the insurer $350,000. Many programs add an aggregate cap on total deductible losses. A self-insured retention differs: there, the insured pays first and the insurer starts to pay only above it. The trade-offs are cash flow, collateral that ties up credit and volatile outcomes. The guide on large deductible workers' comp programs: how they work and what they cost covers the mechanics, and the deductible and retention break-even calculator compares options.

Last reviewed October 10, 2026

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Related terms

Self-insured retention (SIR) The amount of a loss the insured must pay itself, often including defense costs, before the insurer's liability policy begins to pay. Deductible The amount of a covered loss the policyholder bears before the insurer pays, set in the policy and subtracted from the loss. Retrospective rating A rating plan that sets the final premium after the policy ends from the insured's actual losses in that period, within a minimum and a maximum. Third-party administrator (TPA) An outside firm hired to run claims and administration for a self-funded plan, captive or self-insured program without taking on the insurance risk. Captive insurance company A licensed insurer owned by the business or group it insures, formed to underwrite their own risks rather than buying all coverage from outside insurers.

Related guides

How captives are taxed: premiums, 831(b), excise tax and distributions How captives are taxed: premium deductions, the 2026 section 831(b) limit, the 4% excise tax, premium taxes and the micro-captive court cases. Deductibles vs self-insured retentions: who pays first A deductible is billed back after the insurer pays; a self-insured retention is paid by you first. How each affects claim control, limits and credit risk. Fleet insurance: how fleets are defined, rated and insured Fleet insurance is commercial auto for businesses with several vehicles. How fleets are classified and rated, and how to structure limits and deductibles. How to lower your workers' comp costs Ways to reduce workers' comp premium: correct class codes and payroll, prevent and manage claims, protect your mod, and choose the right program structure. Large deductible workers' comp programs: how they work and what they cost How a large deductible comp program works: insurer pays first, you reimburse, collateral secures it, and what happens to claims, taxes and your mod. Risk transfer vs retention: avoid, reduce, transfer or retain Every risk gets one of four responses: avoid, reduce, transfer or retain. How to choose using severity and capacity, with a worked deductible example.

Related insurers

AF Group (Accident Fund) Lansing, Michigan workers' comp specialist (Accident Fund, United Heartland, CompWest) owned by Blue Cross Blue Shield of Michigan; sale to Enstar pending. Amerisure Michigan mutual founded in 1912 that insures mid-sized construction, manufacturing and healthcare firms nationwide through select independent agencies. AmTrust Financial New York-based, privately held insurer; the No. 3 U.S. workers' comp writer, also selling BOPs, packages, E&S and MGA programs through agents. Arch Insurance U.S. arm of Bermuda-based Arch Capital; specialty, E&S and (since buying Allianz's book in 2024) middle market P&C through brokers, MGAs and programs. Encova Insurance Columbus, Ohio mutual formed from Motorists and BrickStreet; workers' comp in 26 states and D.C. and business packages in 22, sold by independent agents. FCCI Insurance Group Sarasota-based mutual founded in 1959 as a contractors' comp fund; writes commercial P&C in 20 states and D.C. and surety in 45, through independent agents.

Related tools

Deductible and retention break-even calculator Compares two deductible or retention options by expected annual cost, finds the claim frequency where they cost the same, and shows what a bad year would cost.