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Is DBA Insurance reimbursable?

Is DBA Insurance reimbursable?

Brian S. Smith is an insurance professional with the Insurance Office of America in Atlanta, GA. He incorporates a process called “Risk Reconnaissance” which is a comprehensive method of uncovering corporate risks and insurable gaps. His work has a focus on government & defense contractors, specializing in Defense Base Act insurance. In addition to blogging, Brian hosts the Risk GovCon Podcast and is one of the founders of Atlanta GovCon.

It is great news to be awarded a government contract.  All the hard work that went into the proposal preparation and the on-time delivery has resulted in a “Big Win” for your company.  But what about the insurance costs?  Sure, you have insurance on your company, but does it anticipate the new exposure?  The new contract?  Wait, Is DBA Insurance reimbursable?

Premium determination for the new contract can have varied results.  If the insurance premium is low, no problem.  If the premium is higher than expected, the impact on the contract profitability can be devastating.

Can the insurance premium be reimbursed by the US Government?

Each awarded government contract stands on its own for reimbursable costs. Two contract types include firm-fixed-price contracts and fixed-price contracts.  The contracting officer and the proposal team must understand the insurance cost impact to the contract.  Costs outside of the scope of the operations will straddle the company with additional costs, reducing profitability.

Cost reimbursement must be approved by the contracting officer, and submitted for repayment if permitted.  On a fixed-price contract, there may be no relief.  It is important to know in advance, the overall cost of insurance.

To determine the premium, the rate, calculated per $100 in payroll, will provide an estimate of the cost. Your insurance broker/professional should assist with the rate determination. By contacting their office and asking for a rate associated with a certain occupation, you can determine the cost of insurance in advance so that profitability will not be marginalized.

If the insurance purchase was not considered during the proposal stage, it will impact the overall profitability of the contract award.  I recommend you speak with your insurance professional on the cost of the insurance and if the cost is worth the award.  They may come back with a very high rate, one that will simply put the entire contract profit in jeopardy.  Other considerations outside of DBA Insurance is the cost of business travel accident insurance.  Finally, ask Is DBA Insurance reimbursable?

Business travel accident is not required by contract but is suggested to fill in the gaps presented by DBA insurance.  For instance, if an employee suffers an illness such as influenza or pneumonia, this may not be covered under the DBA policy since it was likely not caused by a workplace matter.  That being said, the business travel accident insurance would provide for medical care as well as transportation should the employee need to be evacuated to another location.  in short, check with your insurance professional to make sure the gaps are covered.  Learn more about ancillary coverages such as business travel accident by visiting TheRiskRecon.com website.

In conclusion, the cost may be reimbursable, but it is important to know the costs before a contract is awarded.  Minimizing profit loss is critical in sustaining any operation, especially for government & defense contractors.

Do we need DBA Insurance for U.S. Government Contracts?

Do we need DBA Insurance for U.S. Government Contracts?

Brian S. Smith is an insurance professional with the Insurance Office of America in Atlanta, GA. He incorporates a process called “Risk Reconnaissance” which is a comprehensive method of uncovering corporate risks and insurable gaps. His work has a focus on government & defense contractors, specializing in Defense Base Act insurance. In addition to blogging, Brian hosts the Risk GovCon Podcast and is one of the founders of Atlanta GovCon.

A common question I get…Do we need DBA Insurance?  Will I need defense base act insurance for all my government contracts?  The answer depends on the location of the operation in which the contract takes place. For instance, if the contract work location(s) is within the United States, Defense Base Act insurance is NOT applicable. Standard state workers compensation programs will apply.

Defense Base Act insurance is required for ALL US government contracts that operate outside the United States

Defense Base Act insurance is required for ALL US government contracts that operate outside the United States, including Guam and Puerto Rico as territories. Defense Base Act Insurance may be waived for certain countries based on the US Department of Labor website at DOL.gov.  With a waiver, a company may be granted permission to provide an alternative to DBA insurance, such as self-insurance.  The waiver is determined by the US Department of Labor after an application is filed and a determination is made.

The premise for Defense Base Act insurance involving foreign operation locations outside the United States is quite simple.  In general terms, it is a workers’ compensation program that is specifically designed for workers operating outside the United States since workers compensation is a state-based insurance program and will not extend benefits outside of the US.

30 commonly asked questions about DBA Insurance

The insurance benefits under DBA are greater than domestic workers’ compensation, provided by means of a legislative act signed in 1942 that ensures US contractor’s recovery for injury and lost wages because of injury or illness.  Since state workers compensation laws and programs are not applicable outside of the United States, this program is critical to the success and safety of your employee base.

Defense Base Act insurance applies to US nationals, third-country nationals, and any local nationals that are working on the contract(s). The cost of DBA insurance is based upon the operations, country in which the work is performed, and the associated payroll. Additionally, any claims that have occurred under previous DBA insurance policies will impact the premium.  There will be no difference in the rate for a US national, a third country national or local national.

I don’t want to get DBA insurance.  It’s too expensive.  What is the worse thing that could happen?

Consequences of not obtaining DBA Insurance if required may include criminal charges and a fine.  Furthermore, the contracting officer may view this negligence as a mark against the performance of the contract.  Make sure you verify the requirements of the contract as related to insurance.

Visit the U.S. Department of Labor webpage for more details on the Defense Base Act or ask your insurance professional to explain.