A Comprehensive Guide to Reading a Workers Comp Policy

Workers’ compensation insurance is a crucial aspect of safeguarding businesses and employees against financial risks associated with workplace injuries and illnesses. In this article, we will delve into the to read a Workers Comp policy. By understanding the various components that contribute to the policy’s costs, you can make informed decisions to optimize coverage and your costs.

I’ll break down the different parts of the policy here, but it’s probably better to watch the video as there are visuals to go along with it.

YouTube video

Components of the Workers’ Compensation Policy

Class Codes and Payroll

Class codes determine the risk classification of your business activities, impacting your insurance rates. Payroll, denoted as “remuneration” in the policy, is the estimated yearly payroll for each class code. The rate per $100 of payroll, multiplied by the estimated payroll, calculates the base premium for each class code. By summing up the base premiums for all class codes, you arrive at the policy’s base premium.

Additional Factors Influencing Premiums

The policy’s base premium is only one part of the overall workers’ compensation insurance costs. Several additional factors can significantly impact the final premium:

Increased Coverage and Employer Liability Limits

Businesses can opt for increased coverage limits beyond the standard minimums. For instance, the policy examined raised its employer liability limits from $100,000 to $1 million. The associated cost for this enhanced coverage was relatively minimal, making it a wise investment for many businesses.

Experience Modification Rate (EMR)

The EMR reflects a company’s historical claims experience over the past three years. A higher EMR, above 1.0, indicates a higher risk, resulting in increased premiums. Conversely, a clean claims history may lead to premium reductions. Understanding your EMR is crucial in managing and reducing your insurance costs.

Scheduled Debit and Premium Discount

Scheduled debits or credits are determined by underwriters to balance premium rates based on specific risk factors. In this example, despite a competitive base rate for the bar’s class code, a scheduled debit was added due to previous losses. Businesses can work towards reducing or eliminating scheduled debits to improve their premium rates. Premium discounts, on the other hand, are based on the size of the premium paid – the most you pay, the more significant the discount.

Additional Premiums and Employer Assessment

Certain states mandate additional premiums, such as terrorism and catastrophic premiums – these are based on payroll. These charges are standardized and apply uniformly across businesses within the state. Similarly, the employer assessment is a tax imposed on the premium amount, and again, this is a rate set by the state.

In Conclusion

Understanding the rating section of your workers’ compensation policy is essential for businesses to optimize their coverage and manage insurance costs effectively. By analyzing class codes, payroll, experience modification rates, and additional factors, businesses can make informed decisions to enhance their risk management strategies. protect their employees’ welfare, and keep your costs down.

Workers Comp Specialists

Stillwell Risk Partners is a Commercial Insurance and Risk Management firm with a speciality in Workers Compensation.  We’ve aligned with the best insurance carriers to make sure our clients have access to the best rates for their business.  Contact us today to find it if you’re paying too much for your Workers Comp, or the wide range of services we bring to our clients to help them improve their bottom line.

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