Regardless of the business size, one of the most basic costs of doing business is insuring the employees against injuries on the job. Nearly every business in the U.S. that has employees is mandated to have workers compensation insurance. Workers’ comp insurance is a state regulated insurance system that ensures lost wages and medical expenses are paid for employees injured on the job or who have work-related illnesses or diseases. Premiums for workers compensation insurance are determined by how employees are classified and the rate assigned to each employee classification. Here are the three major factors that affect a Workers Comp Insurance Quote.
Size of the Employee’s Payroll
The basis for a workers compensation insurance premium is the employees’ payroll. For every $100 of a payroll, there is a specific rate, which is determined by the classification codes of the employees. In most states, employees’ classification codes are determined by the National Council on Compensation Insurance (NCCI). For better cash flow management, it is recommendable to spread premium payments out over a year, instead of paying them in a lump sum.
Employee Job Classification
Businesses are divided into groups according to the type of work they do. These classifications identify which kind of work presents more risks to persons carrying out these tasks. For each classification of workers, the business owner will pay a certain amount for workers compensation insurance. Insurance companies tend to charge higher premiums for works that present greater risks to employees performing them.
Company’s Claim Experience
A company’s experience modifier, also called Experienced Modification Factor (MOD) is a numeric representation of a business’ claim experience. MODs are determined by how the company compares to others in the industry with similarly classified employees. Businesses with fewer or less severe incidents have an MDO less than average. Such business pay lower premiums compared to those that have an MDO of more than 1.00.
These are just some of the major factors insurance companies will take into accounting when calculating a Workers Comp Insurance Quote. Remember to choose the right insurance firm, to get the best workers compensation insurance policy at an affordable rate. Please contact Insurance Offices Texas for more information about workers compensation insurance.
