Workers’ comp coverage is a crucial part of any business operation, offering protection to employers and employees. However, determining the premium for this insurance can feel like trying to solve a puzzle with a blindfold on.
The array of variables, from business size to industry risk, can significantly influence your quote, leaving you uncertain about control over your company’s financial planning. Thus, understanding these elements is essential for businesses looking to manage their insurance costs effectively.
This article highlights four key factors that might influence your workers comp quote, giving you a clearer insight into your company’s insurance investment.
On this page
1. Employee Classification Rate
Each industry and job role is assigned a specific classification code corresponding to a risk level. This system helps insurers evaluate the chances of a worker sustaining injury when working based on:
- High-Risk Jobs: Jobs in industries such as construction, manufacturing, and agriculture usually have higher workers’ comp insurance premiums due to the higher prevalence of workplace illnesses and accidents.
- Job Responsibilities: Certain roles across all industries carry more risk than others. For instance, construction workers carry a higher risk level, thus commanding a higher premium rate than an employee working at an office.
2. Employer Payroll
The size of a company’s payroll directly impacts work comp premiums. Every company with worker’s comp coverage is obligated to submit a workers’ compensation payroll audit once their policy is renewed.
- Number of Employees: More employees mean more risk of accidents and thus higher premiums.
- Total Payroll Amount: Insurers use your payroll to determine your premiums. You’ll typically pay high workers’ comp insurance premiums if you have a high payroll.
3. Experience Modification Factor
Often called the ‘Experience Mod,’ this factor is calculated based on your organization’s claim history, typically over three years.
A lower EMR indicates fewer claims, potentially resulting in lower premiums. On the other hand, a high EMR, reflecting a higher number of claims, could lead to increased premiums.
That said, insurers will likely charge a higher workers comp quote if your business has a significant record of workers comp claims as it indicates a higher risk. But you can make your rate more affordable through these methods:
- Implementing adequate safety: This approach can give your experience mod a significant boost, lowering premiums since you will have decreased the number of your worker’s comp claims.
- Safety Programs and Training: Provide safety training for all workers respective to their roles, educating them on potential hazards and the safe use of equipment.
- Return-to-Work Programs: Provide modified work duties that employees hurt on the job can still perform. This can minimize claim costs as you’ll have reduced their time off work.
4. Geographic Location
The cost of a works comp quote also varies by the location where you handle your business operations.
Starting at the national level, each state has its own stipulations regarding workers’ comp insurance. States with more stringent laws and higher worker benefits typically have higher insurance costs.
You’ll also find that areas with high living costs typically have higher medical expenses. Consequently, workers’ comp claims will be higher than others, thus raising premiums.
In Summary:
Figuring out how much your business should ideally pay for your workers’ comp insurance can be challenging for businesses. However, understanding the factors influencing these costs can benefit your cause a great deal.
