Did you know insurance companies calculate the cost of workers' compensation insurance using several factors?
Location, total payroll and variables related to perceived risk all play a role — but the biggest factors are your classification codes.
Insurance carriers use class codes to estimate workers' comp rates for individual employees.
Each business has a code based on:
The state of Colorado uses class codes from the National Council on Compensation Insurance (NCCI).
NCCI determines workers' comp class codes and experience modification numbers. Your e-mod score reflects your previous history of workers' comp claims.
Most insurance companies incorporate data from each code to determine a workers' comp rate. The rate factors in the average number of workplace injuries and workers' comp claims for each role.
Generally, industries with inherently riskier workplace environments, such as construction and labor, will have a higher cost of workers' comp insurance for that class code.
Construction workers, roofers, loggers and others who hold the most dangerous jobs typically pose higher risk levels than office, retail and food industry workers.
States using the NCCI system, like Colorado, compile these codes in the NCCI Scopes Manual, which contains comprehensive descriptions of each code and underwriting information.
Determining correct class codes for your organization is key to getting an accurate quote for workers' comp insurance. You can use NCCI’s Class Look-Up tool to search class codes.
To determine your employees' classification code, you'll need to consider:
Once your agent or insurer determines the correct class codes for your business, they will estimate your workers' comp premium per employee.
Providing accurate information is critical to getting an accurate class code. Make sure to include all your employees — whether full-time, part-time, temporary or seasonal.
Your workers' comp insurer can adjust your final rate at the end of your policy year to account for any over- or under-projections with your payroll.
Insurers calculate class code rates as the cost per $100 in payroll.
For example, a class code rate of $1.50 for an employee with $100,000 in annual payroll would cost an estimated $1,500 per year in workers' comp premiums.
Ensure your employees and businesses are appropriately covered for your organization’s line of work by reviewing class codes and other items related to your workers' comp policy before your annual policy review.
Protecting your workers is always a top priority — and using the correct class codes helps to protect you and your business.
Not only that, but Colorado requires all employers to obtain workers' comp insurance and to provide accurate descriptions of their business operations.
At best, providing inaccurate information can result in overpaying for your workers' comp insurance. At worst, it can result in audits, fines or even legal charges.
The process of determining your employees' class is often complicated. Pinnacol’s smart workers' comp technology and dedicated team of underwriters will ensure you get the right class codes and the best rates.
Get started with our quick online application. You can get a quote in as little as 90 seconds, or start your policy in under five minutes!
Prefer a more personal touch? Connect with one of our trusted agent partners in your area.
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