What is DBA Insurance?
What is DBA Insurance?
DBA insurance, or Defense Base Act insurance, exists to provide US Government contractors with an insurance solution to protect its employees and sub-contractors against employment-related injuries while working outside of the United States.
In other words, if you send an employee overseas to provide translator services on the ground and they were injured, seriously or not, you would be held liable. This would include medical costs but also the cost of evacuation or any other serious needs. That is unless you have Defense Base Act insurance.
I’ve just won a US Government contract, they say I need DBA Insurance.
Yes, If you have secured a contract with the Department of Defense, Department of State, or the US Army Corps of Engineers, US Law requires you to secure DBA insurance for your employees while they are working overseas.
The specific law that requires this is the Defense Base Act written in 1941 which was initially designed to provide workers compensation insurance for contractors working on military bases outside of the United States. Since Operation Enduring Freedom and Operation Iraqi Freedom, the need for defense contractors sending employees overseas has increased 10 fold as has the need for DBA insurance.
The cost associated with employees being hurt overseas continues to support the need for this coverage. Medical evacuation, emergency surgeries, even basic (yet urgent) medical care in countries with undeveloped infrastructure has led to increased premiums for DBA insurance.
How much does a DBA Insurance policy cost?
This is a tough question to answer and will depend on a variety of details. We actually cover it in much more detail in our article “How Much Does DBA Insurance Cost?”
However, to give you an idea, the following factors help determine how much a DBA Insurance policy will cost:
- Total payroll for overseas employees for a 12 month period of time
- Geographical regions where work is being performed
- Number of trips planned (if known)
- Qualifications of the employees you are sending
- Number of employees traveling overseas
- Previous claims or losses with DBA Insurance
- Transportation plan within the country
- Employees working on a military base or off
Typically we see minimum premiums no less than $5,000 for an annual policy. Areas of the world with a higher risk of civil unrest may have minimum premiums upwards of $10,000. Again, these are, of course, minimums. Payroll will be the largest factor in determining rates.
As you most likely already know, qualifying and reasonably priced DBA policies are a reimbursable cost under government contracts. Our companies are keenly aware of this and provide policies rated fairly and in-line with government requirements.
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How is DBA Insurance similar to my worker’s compensation insurance policy?
The coverage is very similar to domestic workers compensation in the way that it is written and responds to injuries sustained by an employee. If you need the basics of workers compensation check out this article.
Standard workers compensation will protect employees while performing duties on US soil. DBA insurance will protect your employees performing assigned duties overseas.
For example, you may have an employee that you pay to help manage your operations while in the US AND pay them to travel with a group to continue work in a foreign country. In this example, the payroll from the US would need to be accounted for separately from other countries.
Just like a typical workers compensation policy here in the US, you will be audited (from the issuing insurance company) at the end of the policy term and must provide proof of the actual payroll that you incurred.
It can be a tedious accounting problem to separate payroll performed overseas and domestically, but it is to be expected and must be completed.
DBA Insurance Only Covers Employees When They Are Overseas
Most contractors often first believe that DBA insurance will cover employees both on US soil and overseas. This is a common misconception.
As we have explained, DBA provides coverage internationally and your worker’s compensation covers nationally.
Additionally, where domestic workers compensation policies only cover an employee while they are physically “on-the-job,” DBA insurance policies, at times, will actually cover periods of time surrounding the actual work and sometimes the entirety of an employees’ day. This is due to the “zone of special danger” and doctrine of “reasonable recreation.”
In brief, if you are sending employees to war zones or areas with high civil unrest you very well may be required to protect your employees for the entirety of their time in country.
But I’m not entirely clear on the scope of my contract with the Government. What if my payroll changes throughout the year?
Great news on this one…We understand.
Just because you have been awarded, or are party to a government contract, doesn’t mean that you have completely mapped out your needs for the coming year.
Fortunately, we represent several companies that have built flexibility into their policies. We simply need you to estimate what your first few months will look like. From there, as the contract matures, we can endorse (change) the payroll estimations to account for increased activity.
Keep in mind, as you estimate your payrolls, WHERE you are sending employees matters greatly. We need to use an area of the World most likely to be visited in the first few months of your contract.
If your contract is worldwide in scope, we will be able to adjust the policy as you take assignments in different countries. Keep in mind, the location you are traveling will have an impact on the final premium on the policy.
WHAT your employees are doing matters.
We have talked a lot about where you are sending employees and how much you intend to pay them. Another factor in what you will ultimately pay for the DBA insurance: what are your employees are physically doing on the ground?
For example, sending a linguist into Syria will be exponentially more expensive than sending a linguist to Germany, or the UK.
Conversely, if the work is primarily consulting, based behind a desk, you can expect to pay lower premiums.
Just like domestic workers compensation policies, the relative risk and nature of the job performed will inform the pricing. Expect to pay more for physical labor and less for clerical/office type work, comparatively.
The qualifications of your employees will also be part of the equation though perhaps less so than other rating factors. As a general rule of thumb, inform the insurance company and agent you are working with on what professional and specific experience your employees will have. This will assist in the underwriting process when other details remain unknown.
You also must provide information on travel in and around the country as this can be another major factor contributing to rate fluctuations. If you have a well laid out plan for travel within the countries you are contracting in, that is obviously more desired than unknown travel plans in less developed areas.
Let’s get started.
The best way to determine what your rate will actually be is to contact us and get started on the underwriting process. The more specific you can be with your information (WHO, WHAT, WHERE, WHEN, HOW) the better.
Despite all of the specific details, the application process for DBA insurance will be fairly painless. There are only a few companies nationwide that actually write DBA insurance. Because of this, the process of obtaining the coverage has become somewhat streamlined.
The hardest part will be knowing exactly where you are sending some of your first employees and what their specific scope of work will be.
Once you have this information, you will fill out a brief application to help determine your needs.
Want to speak with us prior to submitting an official application? Great! Contact us today.
One final point to consider. We will need a copy of your contract to submit to the insurance companies. We can often get a cost indication based on your fact chain. However, we will need evidence of the contract to issue a new policy.
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