Workers' comp premium calculator

How to use it

The calculator rebuilds a workers' comp premium the way an insurer's rating worksheet does. The two classes and all the rates it opens with are examples. Replace every one with the figures on your quote or policy.

Class rows (up to five). For each row enter the class code, a description, the annual payroll for that class and the rate per $100 of payroll. Codes, rates and payroll estimates are on your quote or the information page of your policy. A row with no payroll is ignored. See workers' comp class codes and why they matter.

Rating factors.

• Experience mod. From your NCCI or state bureau worksheet. Enter 1.00 if you have none. The Experience mod (EMR) calculator can estimate one.
• Schedule rating. A percentage, negative for a credit (for example −10) and positive for a debit. It is on your quote.
• Premium discount. The percentage shown on your quote. Larger accounts earn a graduated discount.
• Expense constant. A flat charge. The $250 default is an example.
• Terrorism and catastrophe charges per $100 of payroll. The $0.02 default is an example.
• State assessments and surcharges, as a percentage.

The math

In the order the code applies them:

1. Manual premium = for each class, payroll ÷ 100 × rate, added up.
2. Modified premium = manual premium × experience mod.
3. Standard premium = modified premium × (1 + schedule rating %).
4. Discount = standard premium × discount %, subtracted.
5. Add the expense constant.
6. Add terrorism and catastrophe charges = total payroll ÷ 100 × the rate.
7. Assessments = the subtotal so far × assessment %, added to give the estimated premium.

The effective rate shown is the total ÷ payroll × 100.

Hypothetical: a shop with $300,000 of payroll in one class at an example rate of $4.00 per $100 has a manual premium of $12,000. A mod of 0.90 gives $10,800. A 5% schedule credit gives $10,260. A 3% discount takes off $307.80, leaving $9,952.20. Add a $250 expense constant ($10,202.20) and $90 of terrorism and catastrophe charges at $0.03 per $100 ($10,292.20). A 2% assessment adds $205.84, for $10,498.04, or about $3.50 per $100 of payroll.

Assumptions and limits

• Estimated payroll. Workers' comp is priced on estimated payroll and settled by a payroll audit after the year. The final premium follows your actual payroll, so a growing business should expect a bill and a shrinking one a refund. See premium audits: how they work and how to prepare.
• One mod for every class. The tool applies the same mod and schedule rating to all rows.
• Assessment base. The tool applies the assessment percentage to the subtotal, but states differ in the base they use. Other state-specific charges are not modeled.
• Minimum premiums. Insurers apply minimum premiums and, in some states, other charges. A very small account may pay more than the build-up shows.
• Payroll definitions. What counts as payroll, including overtime and officer pay, varies by state and class rules, and some classes are rated on a basis other than payroll.
• Not a quote. Rates differ by state and insurer, and the examples shown are not market rates. Experience rating works differently in some states, and a handful run monopolistic state funds, so the build-up there differs. See Monopolistic state funds: workers' comp in ND, OH, WA and WY.

The result tells you whether a quote is built the way it should be. If your quote's total is far from what you calculate with the quote's own inputs, ask the agent for the rating worksheet. The workers' comp and benefits requirements by state shows whether your state requires coverage, and how to lower your workers' comp costs covers what moves the factors you can influence.