What Is Workers Comp?

20 Sep by tailordinsurance

What Is Workers Comp?


Workers’ Compensation also known as Workmen’s Compensation or Workers’ Comp for short, is a form of social insurance that was established to provide partial medical care and income protection to employees who are injured or become ill when on the job.

Workers’ compensation insurance coverage can purchased by employers through private insurers or state-certified compensation insurance funds.

Class Codes

Class codes are used to categorize different lines of work, distinguish between various industry roles, and group them together based on the risk and characteristic’s of the job.

Class Codes are analyzed at a state level, the premiums and losses of businesses within a specific class are analyzed by the state’s respective rating bureau to determine expected cost of losses; this is known as the Loss Cost or Base Rate.

You can search your class code here.

Base Rate

When factoring the premium for a workers compensation policy, the class code is assigned, the base rate is applied and then multiplied by the annual payroll of the Job Role.

A Base Rate of 1.25, equates to $1.25 in premium for every $100 of payroll in that class code.

For instance a payroll of $50,000 at a base rate of 1.25 equates to annual premium of $6,250.

$50,000 x .125 = $6,250.

Experience Mod

Experience ratings also known as the Experience Mod, are used to recognize the differences amongst qualifying employers with respect to safety, loss history and prevention. This is done by comparing the experience of individual employers with the average employer in the same classification. The differences are reflected by an experience rating modification (Experience Mod), based on individual payroll and loss records.

An Experience Mod of 1.0 is standard.

$50,000 x .125 = $6,250.

$6,250 x 1.0 = $6,250

A Debit Mod is an Experience Mod Factor of more than 1.0, Which means losses are worse than expected and resulting in an increase in premium.

$6,250 x 1.10 = $6,875 ($625 Increase)

A Credit Mod is an Experience Mod Factor of less than 1.0, Which means losses are better than expected, resulting in a premium discount.

$6,250 x .90 = $5,625 ($625 Decrease)