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How Company Classification Affects Your Rates

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Insurance rates can often seem confusing and unpredictable. They’re based on several factors, both related and unrelated. Workers’ compensation centers around one’s status as an employee: what you do, how much you make, and your history with the company are all considered. This article will help de-mystify the topic and explain how your insurance rates are calculated.

First, workers’ compensation for every employee is based on a classification code. Rather than a personal identifier (such as your ID or social security), this number represents just one of many specific pre-determined categories. For example, utility system construction is class code 2371, and automobile dealers are 4411. Employees will fall into different categories depending on their position. If a position comes with inherent risk (think construction worker or cell-tower technician), the rates may change drastically.

Now that you have a better idea of worker identification via classification codes, you can use that to better determine your insurance rates. Workers’ compensation is typically calculated based on three key factors. The first is your classification code, which we just discussed above. Insurance providers will look at the inherent risks that come with your position. With this logic, we can determine that an office worker will generally have lower insurance rates than the aforementioned construction worker. Someone who works at their desk doesn’t have to worry about head injuries or falling from great heights.

Similarly, your insurance provider will take a look at the payroll. How much do your employees get paid to do what they do? How does this compare to other employees at other companies in your line of work? Are you offering them any bonuses or overtime? Don’t forget, it’s typically the employer that pays for workers’ compensation. Be sure that your employees are properly insured, however negligible the risk of serious injury. This will help prevent lawsuits and any further damage to the company.

Finally, an employee’s history will play a significant role in their current rates. If the person is prone to injury or has filed multiple claims in the past, they pose a greater risk to the insurance provider. Naturally, their rates will be higher to compensate for the risk. This is pretty standard across all types of insurance coverage, including car, home, and life insurance.

These are the three main factors that affect workers’ compensation rates. If your rates have recently undergone drastic change, consider why this may have happened. You are now better-equipped to identify and monitor the factors associated with these kinds of changes.