What Employers Should Know About DBA Insurance

Defense Base Act insurance (DBA insurance) can be tough to comprehend for many people, including the employers themselves.

In short, DBA insurance provides protection for US Government contractors and their employees against injuries while working overseas. Without it, if you send an employee and they get injured, you would be liable for medical and other associated costs.

Here are the basics you should be aware of before filing an application. 

What is DBA Insurance?

If your company has secured a contract with a US government agency such as the Department of Defense, you have to purchase DBA insurance for your employees. More precisely, you are required to do it by the Defense Base Act.

This act was created to provide workers’ comp insurance for those working on military bases overseas. Since US military operations in the early 2000s in the Middle East required many defense contractors to send their employees abroad, the need for DBA insurance increased dramatically.

Additionally, the cost of medical evaluation, emergency surgeries, and medical care in foreign countries has also led to an increase in DBA insurance premiums - the thing most employers are rightfully worried about.

The Minimal Cost Of Dba Insurance Policies

Many details will influence the cost of a DBA insurance policy, making it impossible to estimate the exact amount. However, the following factors will give you a better idea of the associated costs:

1. Qualifications of the employees you’re sending to work overseas

2. Geographic area where they’re being sent

3. Number of planned trips

4. Total salary for employees over 12 months

5. Number of employees 

6. Transportation plan in the country where they will work

7. Whether employees are stationed on the military base or working off-site

8. Previous claims with DBA insurance

On average, a DBA insurance policy will cost you around $5k annually. Still, you should take this with a grain of salt because your minimum premiums can change depending on the factors listed above.

For example, if you send your employees to a country with a high risk of civil unrest, your premiums may be as high as $10k a year. The costs may grow even higher if you’re sending employees on a larger payroll.

Thankfully, DBA policies are considered reimbursable costs in most US government contracts.

Is Dba Similar To Workers’ Comp?

Both policies are similar in the way that they provide coverage for employee injuries. The difference is that workers’ comp protects your employees while working on US soil, while DBA coverage will protect them while they’re working in a foreign country. 

For instance, let’s say you have an employee working for you in the US. If you pay them to travel abroad, you’ll need to account for their work in other countries separately from their salary in the United States.

Workers' compensation and a DBA policy are also similar in the auditing process required at the end of the term of the policy. For both policies, you have to provide proof of the payroll incurred. 

This is a little bit trickier when dealing with overseas workers, as you have to account for separate payrolls.

You’re also probably wondering if a DBA policy will also cover your employees once they return to the home soil. The answer to that question is no, as it only provides coverage when your workers are performing their duties internationally.

Another major difference between the two policies is that workers’ comp covers your employees only when they’re at work. On the other hand, depending on the DBA policy and the circumstances, it can also cover your employees while they’re not doing actual work. 

This means that if you send your employees to dangerous areas, you may be required to protect them for the entirety of their employment.

The Effect Of The Type Of Work On The Insurance Premium

The jobs your workers perform will greatly influence the amount you have to pay for their insurance. There are many ongoing conflicts the US is involved in, and sending employees to those areas will be a lot more expensive than sending them to a country in Europe, for instance.

You’ll also pay a lot less if your employees are doing work such as consulting or regular office work. This is due to the fact that the relative risk greatly influences the pricing. Comparatively, if your workers are doing physical labor, the price of insurance will reflect the risks of that job.

Another important factor is the qualification of your employees. The same applies to information about travel arrangements in the country you will offer your services. It’s usually preferable to supply the insurance company with the details about your employees' experience, as well as an extensive breakdown of their travel plans.

What To Do If You’re Unsure Of The Details Surrounding Your Contract

Even though it’s a government contract, you may not have all the details mapped out yet. Thankfully, some insurance companies are flexible and will only require you to deliver an estimate of the first few months of your activity abroad. 

As the contract develops, they can modify the estimations to account for the changes.

The same flexibility may apply to worldwide contracts, and you can usually adjust the policy according to the country your employees are being sent to. 

Protecting Your Employees

The Defense Base Act insurance provides your employees with the necessary protection when they’re working for you abroad. While the premiums may be confusing, it’s a necessary part of doing contracting work for the US government.

To receive a better estimate of the premium you’ll have to pay, you should reach out to an insurance company that provides this type of coverage. 

The silver lining here is that the application process is relatively straightforward as there aren’t that many companies offering DBA insurance. This ensures that the entire process will be a lot more painless as you won’t have to worry about finding the right provider.

Simply supply the insurance company with all the basic details like the scope of work and the location where you’ll send your employees. Then, fill out an application, and you’ll officially take your first step as a government contractor.