Lake Ozark businesses often reach out to us asking for clarification on a common type of commercial insurance. Specifically, they want to know how workers’ compensation is calculated.
This question makes sense for the savvy business owner to ask. After all, you want to be sure you’re getting the best rate possible for your business. Even if you’ve done everything you can to lower the cost of your workers’ compensation insurance, you still want transparency around how your premiums are calculated.
To help you wrap your head around this type of insurance, let’s examine the various factors taken into consideration when giving those quotes you get for workers’ compensation insurance for your Lake Ozark business.
Workers’ Compensation Insurance Calculation 1: Remuneration
Remuneration is a fancy term for the elements in your company’s total payroll plan. This plan includes factors beyond wages, such as commissions, bonuses, overtime pay, holiday pay, vacations and sick leave, payment for piecework, housing values, cafeteria plans, and other forms of compensation.
Insurance companies need to know how much an injured employee would receive to make up for lost wages due to a job-related accident or illness. Knowing the full payroll plan, your employees rely on will help your insurance provider better understand what a settlement would look like. Those estimations are then factored into your premium.
Workers’ Compensation Insurance Calculation 2: Job Classification
Every state has a classification code for the type of work performed by employees, which is determined by the National Council on Compensation Insurance (NCCI). These rates are used to predict better the risk factors associated with the job that’s being insured. The rates are based on what others in those job roles have claimed in the past.
Insurance companies use these rates to multiply your payroll by the job classification or rating. To simplify this calculation, the insurance company will divide your payroll or remuneration by $100. Then, they will take the job’s class code and multiply that figure by the payroll figure.
Workers’ Compensation Insurance Calculation 3: E-Mod
In addition to remuneration and job classification, your workers’ compensation insurance company will also consider an experience modification factor or e-mod. E-mods are calculated by the National Council on Compensation Insurance (NCCI) by analyzing past losses in your industry and your actual losses. If the actual losses are lower than expected, your e-mod will also be lower. If they’re more significant, your e-mod will increase over 1.00, simultaneously increasing your premium.
Ready to Have Your Workers’ Compensation Insurance Rate Calculated?
Even with full transparency behind most of the underwriting process, it can still be overwhelming to try to understand your rates. That’s why we’re here. When you request a proposal from McGrath Insurance Group, we’ll help you find the rightcoverage for your unique business needs. Because we’re an independent insurance agency, we can work with a variety of carriers to get you the best rate and policy for you. Contact us today to get the process started and compare what we can do for your Lake Ozark business with what you’re currently using for your insurance needs.
