Organizations

Separate Fact from Fiction: 9 DBA Insurance Myths to Debunk

Separate Fact from Fiction: 9 DBA Insurance Myths to Debunk

BY clements-worldwide

Last updated May 10, 2022 7 minutes read

When researching DBA insurance, deciphering what’s true and what isn’t can be difficult. Plus, with the continuing changes in legislation, navigating the confusion and bad advice you find can make obtaining your contractual insurance requirements even more daunting.

Government contractors must obtain Defense Base Act (DBA) insurance, so choosing coverage that fits their needs and is compliant with the US Department of Labor’s (DOL) standards is crucial.

Federal law requires all U.S. government contractors and subcontractors to secure workers’ compensation insurance for their employees working overseas.

(Source: DOL)

To help you find the correct information you need, we’ve picked out some of the most common misconceptions contractors have about DBA coverage and provide you with clear and accurate answers.

Here are the Most Common DBA Misconceptions We Hear

Myth 1: DBA Can Cover Health and Sickness Matters

DBA does not cover illnesses and other health-related matters. Your employees would receive coverage for these things under their standard health insurance. At the same time, there are some exceptions. For example, if you were to get sick from endemic, region-specific illnesses like malaria, Ebola or Denga fever, those would all be covered under DBA.

Myth 2: Coverage Is Not Necessary for Local Nationals

Everyone working under a government contract must have DBA insurance. It doesn’t matter if you’re a local national or not.

“Being uninsured or not having approved insurance is NOT an option. If you do not obtain DBA coverage for employees and do not have an approved waiver you could face hefty fines, litigation and/or criminal prosecution.”

Vito Gaeta, US Head of Commercial Insurance at Clements Worldwide

You can get a waiver from the DOL, but this is typically for specific circumstances. Here, you can find a list of country-specific waivers from the DOL if you need them.

Myth 3: Employees Can Get 100% of Their Payroll Replaced

Payroll is not 100% reimbursable. Even if the coverage is for permanent total disability, there are certain limits. You can only get up to 66 2/3rds of your weekly salary up to a maximum of about $1,727 a week. The maximum payout set by the US Department of Labor changes every year. If your salary is more than $134,607 annually, there’s a chance you won’t get the full weekly payout because of that maximum weekly benefit.

Misconception 4: All DBA Claims Come with a Statute of Limitations

There is no statute of limitations for receiving benefits from a DBA insurance claim. Employees should notify their employer as soon as possible and, in most cases, within the first 12 months of the incident. Once your employee informs you about an incident, you, as the employer, have 10 days to file an LS-202 with the DOL.

Contractors working on a building site abroad.
It’s important that DBA insurance fully covers your employees.

However, that doesn’t mean your employees should file a claim whenever they choose. For instance, if one of your employees breaks their leg on the job, they should file a claim as soon as they return from the hospital. In instances like these, injured employees should file a claim within the standard 12-month notification period and you, as the employer, should be able to file the paperwork within the 10-day reporting period.

“To avoid miscommunications about filing claims late, make sure your employees understand their rights and are knowledgeable about work-incident reporting procedures.”

Matt Tuman, a commercial insurance advisor specializing in DBA insurance

There are exceptions to the notification rule and timeline, like PTSD claims and work-related injuries/illnesses that occurred in the past. For example, if your employees were exposed to a toxic chemical on a government contract assignment a decade ago and current medical research shows a link between the toxic chemical and a debilitating illness, situations like these don’t typically have a statute of limitations.

Myth 5: You Don’t Need Life Insurance Because DBA Provides Death Benefits

If your employee gets killed on the job, DBA can act as an accidental death policy. However, death due to sickness is not covered by DBA insurance. That’s why having life insurance is critical and employers look to provide group life insurance for their employees. If the deceased employee is single, their parents or next of kin do not get death benefits. DBA only provides death benefits to those who have spouses or dependents.

“When an employee dies while working overseas, it is heartbreaking for their families. The last thing they want to worry about is how they’re going to pay their bills or continue to provide for the family. However, if the employee dies off the job, it’s important to have supplemental insurance in case they are not covered by DBA insurance.”

Kevin Pedone, commercial insurance advisor and DBA expert at Clements

Myth 6: There is No Minimum Cost for DBA Coverage

DBA insurance has minimum costs that can range dramatically based on the exposures. But for standard risks you can see the lowest cost range from $5,000 to $10,000, even if your employees are only on contract for one day. If you’re performing work overseas, who you use could be the difference between having coverage that fully protects you and coverage that only provides the bare minimum.

Myth 7: DBA Doesn’t Cover Off the Job Injuries

DBA can cover injuries that occur off the job in certain cases. For example, under the Special Dangers Doctrine, DBA can cover off the job injuries for government contractors stationed in warzones or living in hazardous conditions.

Myth 8: You Can get Reimbursed for Unused DBA Premiums

DBA coverage amounts are a minimum and a deposit premium, meaning you don’t get a premium reimbursement.

DBA policies can have different minimum cost limits. However, there is no return premium under your minimum cost. In some cases, the employer can get refunded on their unused DBA premiums after an audit has occurred. This would only occur if your the annual premium was higher than the minimum premium and the audit showed there was unused premium in excess of the minimum premium amount. We understand this can be confusing. So, if you have any questions reach out to our commercial insurance experts who will be happy to help explain how it all works.

Myth 9: The Government Pays Out All Claims

Most claims are paid out by the insurance company. However, there are some instances where the US Government will reimburse your insurance carrier for paid claims when your employees get injured, like injuries due to war, war-like actions, terrorism or PTSD.

Knowledge is Power When it Comes to DBA

Arming yourself and your employees with accurate information about DBA insurance is crucial. When you know what to look for, what’s covered and how much it costs, you can begin your government contract with peace of mind.

Learn more:

Have Questions?

Get the right answers from our commercial insurance team who handle hundreds of policies a year. They can help you obtain better quotes and understand what your coverage includes.

Clements Worldwide has been helping government contractors get the coverage they need since 1947 and continue to provide insurance for global contractors located all over the world.

We Are Here to Help

Request a quote or reach out about your insurance needs.
Get A Quote Contact Us