Estimate a workers’ compensation premium from payroll, class rate and experience modification.
Manual premium = payroll ÷ 100 × rate.
Estimated premium = manual premium × experience mod.
A landscaping company has $450,000 of payroll in its main class at $2.35 per $100. The manual premium is $10,575; with a 0.95 experience mod, the estimate is about $10,046.
Workers’ compensation premiums are mostly driven by payroll in each job classification, the rate for that class and your experience mod. Accurate payroll by class, from good time records, keeps the premium and the audit fair.
Rates vary by state, insurer and class. Actual premiums include other factors such as minimums, fees and discounts.
A roofing contractor estimates $180,000 of roofing payroll for the year at a rate of $11.80 per $100. The manual premium is $21,240.00. Its experience mod is 1.12 after two claims, so the estimate is $23,788.80, or $132.16 per $1,000 of payroll.
The estimate is payroll times rate times mod, so it changes as soon as actual payroll differs from your estimate, and the year-end audit will settle the difference. Some payroll may be limited by state rules, such as caps on officer payroll, so entering every dollar paid can overstate the premium. Rates and class definitions vary by state and insurer, so use the rate from your own quote.
Most states use class codes and loss costs from the National Council on Compensation Insurance, NCCI, and insurers build their rates on top. Several states run their own rating bureau instead, including California, New York and Pennsylvania, so class codes and descriptions there differ. Four states, North Dakota, Ohio, Washington and Wyoming, have monopolistic state funds, where coverage is bought from the state rather than private insurers. If you work across state lines, run the calculator per state as well as per class.
A factor comparing your claims history with similar businesses.
Each class has its own rate.
A review of actual payroll after the policy year.
No, it is an estimate before fees and discounts.
Run the calculator once per class with that class’s payroll and rate, add the manual premiums, and apply the experience mod to the total. A roofer with office staff will see most of the premium come from the roofing class even when office payroll is sizable.
A mod above 1.00 means past claims were higher than expected for a business of your size and class, so premium goes up; 1.12 adds 12%. A mod below 1.00 lowers it, so 0.85 cuts the manual premium by 15%.
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