How is my Workers' Comp Insurance Premium Calculated?

January 18, 2023

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Investing in worker's comp insurance can be a smart move for your business, but the idea of covering the cost of the policy can be a bit daunting. However, if you stop for a minute and think  of the various ways your employees can potentially get injured and what it would cost to cover the medical bills and leave for those injuries, the insurance premium payments no longer seem too bad.

Understanding how to calculate your workers’ compensation policy premium from the get-go can help you feel better about buying a workers’ compensation insurance policy.  ensuring you’re getting the protection your business needs to thrive. 

The basic equation to calculate Premium

There is a basic equation that is used to calculate your Workers’ Comp policy premium which  is as follows: Annual Employee Payroll / $100 x The Rate = Your Premium 

Let’s now look at each factor in this equation. Annual Employee Payroll; this number should be the annual gross projected payroll you intend on paying your employees throughout the policy term, effective date to expiration date. If your business has various categories of employees (see example below) try to break down the projected payroll per category or kinds of various work performed by your employees. 

Continue by dividing each annual payroll figure by $100. Now here comes the fun part, The Rate. Insurance companies use a lot of factors to determine the rate (per every $100 of payroll) that you will be charged. The main factor is the number of claims and the total value of claims that your specific industry filed in your state over time. Which is why rates can often change year after year. Essentially, the rate reflects the level of risk employees in your industry are exposed to and the likelihood of an injury occurring. For example, the rate for a roofer will be a lot higher (pun intended :-) than that of a clerical worker sitting in a comfortable office chair all day long. 

Example of how do the calculations

Let's take a Landscaping business to demonstrate how this works. 

The business has 4 employees in total. 2 that work in the office and 2 that work as landscapers. 

Let’s talk about the office employees first.

Annual Employee Payroll: The 2 office employees have a combined projected payroll of $60,000. 

Rate: The rate for a clerical worker in their state is $0.15 per every $100 of payroll.

Plug the numbers into the formula Annual Employee Payroll / $100 x The Rate = Your Premium

$60,000 / $100 x $0.15 = $90

So the annual premium for these employees will be $90. 

Now let’s calculate the landscaper workers’ comp premium. 

Annual Employee Payroll: The 2 employees that work in the field have a combined projected payroll of $100,000.

Rate: The rate in their state is $5 per every $100 of payroll.

Plug the numbers into the formula Annual Employee Payroll / $100 x The Rate = Your Premium

$100,000 / $100 x $5 = $5,000

So the annual premium for these employees will be $5,000 

Next, add both totals together which equals $5,090.00+ taxes and fees. 

Keep in mind that in some states the rates can vary per carrier and in others the rate is set by the state. Carriers can also add credits or debits based on a case by case basis. 

Don’t want to calculate your premium manually? You’re in luck :) We have a really nifty form that will do all the calculations for you. Get started here.

How to find your rate

While all of the above may help you calculate your premium, there is one more item to bear in mind and become familiar with. Every industry is described by a class code. This is typically a 4 digit code that underwriters and insurance geeks, like us at Kickstand, use to describe your type of business and your operations. For example 8810 is clerical  and 0042 is landscaping. Each class code has a specific rate - that’s what we’ve been referring to as The Rate.

Where can I get a fast Workers’ Comp Insurance Quote?  

Are you ready to partner with workers’ comp experts? At Kickstand Insurance, we can help you get an idea of what to expect when it comes to workers’ compensation insurance policy costs. 

As soon as you fill out this form, you can get an instant quote of an estimated workers’ comp premium. Within 10 minutes, we can help you get an idea of what you’ll likely pay for workers’ compensation coverage, and then get you covered, all in the same business day. It’s that simple and seamless. 

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