DBA Insurance Premium Calculation

So you’ve just won a new contract with the Federal Government and in the contract, under insurance, it says Defense Base Act Insurance required.

First thing you do if this is your first OCONUS contract is likely to wonder… What is Defense Base Act Insurance and what is it going to cost me?

Premium Determination for DBA Insurance

The premium for DBA Insurance is based on a variety of factors.  These include the type of work being performed, the payroll associated with the work, the number of workers, and any associated past claims.

The insurance company underwriter reviews the DBA Insurance Application to see what is being performed along with the payroll, country, and employee count.  As such, the insurance company determines a rate, not the federal government.

For USAID contracts, the rates are set by the US Department of Labor, but for all other agency contracts, the rates are determined by the underwriter and on a case by case basis.

Premium Formula

The premium calculation is simple and straightforward.  It is the rate provided by the underwriter multiplied by the payroll on a per $100.00 basis.

Here is what it looks like:

DBA Insurance Rate (Example only) $3.25

Payroll $500,000 ÷ $100.00 = $5,000

Premium = $5,000 x 3.25 = $16,250

Rate Negotiation

Insurance rates are always negotiable, however this is to be agreed upon with the underwriter.  In order for a rate reduction, the underwriter will need to justify their decision.  This is best done by providing detailed information on the operations and the associated safety program.

When dealing in large payroll figures, negotiating DBA Insurance rates can potentially save thousands of dollars.

Work with your insurance broker to detail the operations in order for the underwriter to understand what is being performed as well as what is not being performed.  In other words, make sure the underwriter is not making assumptions when it comes to your operations.

Brian Smith is a commercial insurance broker with the Insurance Office of America.  He specializes in working with government contractors with both CONUS and OCONUS operations.  Learn more at www.riskreconnaissance.com or by calling direct at (404) 918-4775