Business Owners Guide To Workers Comp: How Premiums Are Calculated


Workers comp premiums are a necessary cost for business owners. Not only do they help ensure employee safety, but they also help protect you from potential liabilities in the event of an injury or illness.

But how are these premiums calculated? Understanding the factors that impact workers comp premiums and how they are calculated can help you manage your business more efficiently and make sure you are paying the right amount for coverage.

This article will explore the different components that go into calculating workers comp premiums. We’ll look at the type of business, the number of employees, the type of coverage, and other factors that can impact the cost of your premium. Armed with this knowledge, you’ll be better equipped to make informed decisions and keep your business running smoothly.

1. The Type of Industry

The type of industry your business operates in can have a significant impact on your workers’ comp premiums. Some industries are inherently more dangerous than others, which will naturally increase your risk.

Common industries that carry a higher risk and, therefore, typically pay a higher premium include construction, manufacturing, agriculture, and forestry. If your industry has a higher risk, you will likely pay a higher workers comp premium.

But you may also purchase an additional policy called Employers Special Liability (ESL) insurance. This coverage protects you from additional liabilities that are not covered by the standard worker’s comp coverage, making it a good option for businesses in high-risk industries.

2. The Size of the Company and Number of Employees

The size of your company is another factor that impacts workers comp premiums. In general, larger companies can afford to pay more for coverage than smaller ones, which means that premiums may be higher.

Similarly, the number of employees you have on the payroll can greatly impact your workers comp premiums. The more employees you have, the higher premiums you will pay. This makes sense, of course, as larger companies are more likely to experience injuries and illnesses than smaller ones.

3. The Nature of Risk Involved

The nature of your business’s risks can also impact your workers comp premiums. Risks such as repetitive motion injuries or work in a dangerous environment can add to your premium costs.

Although these types of risks can be a normal part of certain industries, they can sometimes be avoided with proper training and precautions. If you are able to minimize the risks your company faces, you can lower your premium costs. This can include things like providing training for employees, providing safety equipment, and following OSHA safety standards.

Keep in mind that your premiums could increase significantly if you don’t have a good track record with workers comp.

In Conclusion

Workers comp premiums are necessary for business owners, but they don’t have to be a source of stress. By understanding the factors that go into calculating premiums, you can make sure you are paying the right amount for coverage. This can help you manage your business more efficiently and protect your company.


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Founded in 1994 by the late Pamela Hulse Andrews, Cascade Business News (CBN) became Central Oregon’s premier business publication. •

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