Workers’ compensation insurance premiums are calculated based on several factors, including:
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Classification Code: Every job is assigned a classification code based on the level of risk associated with it. Each classification code has an associated rate that reflects the expected frequency and severity of workplace injuries for that job. For example, office workers typically have lower rates than roofers due to the difference in occupational hazards.
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Payroll: The size of your company’s payroll is a significant factor in determining your workers’ compensation premium. Premiums are often calculated as a percentage of your total payroll.
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Experience Modifier (MOD): The experience modifier is a factor that adjusts the premium based on your company’s past history of workers’ compensation claims. If your company has a history of more frequent or severe claims compared to similar businesses, your premium may be higher. Conversely, if your company has a good safety record, you may qualify for lower premiums.
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Location: Workers’ compensation rates can vary by state due to differences in regulations, benefit levels, and healthcare costs.
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Safety Programs: Some insurers offer discounts for implementing safety programs and providing training to reduce the risk of workplace injuries.
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Claims History: Your company’s claims history directly affects your premiums. A history of frequent or costly claims will likely result in higher premiums.
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Coverage Limits: The limits of coverage you choose also impact your premium. Higher coverage limits will generally result in higher premiums.
To calculate the premium, insurers typically multiply the rate for each classification code by the company’s payroll (per $100 of payroll) and then adjust for the experience modifier. The formula might look something like this:
Premium = (Payroll / 100) x Rate x Experience Modifier
It’s essential for businesses to accurately classify their employees and maintain accurate payroll records to ensure that they are paying the correct premium. Additionally, implementing safety measures and managing claims effectively can help control costs and potentially lower premiums over time.
Conservation United is happy to provide a complimentary policy review to ensure that your organization is correctly classified and is paying the lowest achievable rates. Contact us today!
