Workers' compensation insurance premiums are calculated as a percentage of payroll received per employee. If an office worker receives $100, for example, maybe $1.15 would be charged for premium. Every type of worker is assigned a standard classification code, and each class code has a different percentage. The class code rates are filed by each insurance company with California's Department of Insurance and are subject to change each year. Each insurance company will have its own set of class code rates.
Download the class code definition form from the Workers' Compensation Insurance Rating Board website. Use this form to determine which class codes apply to your employees.
Download the current year's workers' compensation comparative class code rate table from California's Department of Insurance website. There are a total of 7 PDF files covering all the class codes.
Locate the class code that applies to your employees, then locate that class code on the DOI's rate table. Find your insurance company within that class code. You will see a figure under the Manual Rate column that represents the percentage of payroll that will be charged for those employees.
Multiply the appropriate percentage rate by the total annual payroll for each employee who is covered by that class code. If more than one class code applies to your business, repeat the above steps for each applicable code. The sum for all codes will be the total unmodified workers' compensation insurance premium you can expect to pay over the next year if your overall payroll does not change.
Your insurance company may discount or surcharge this rate based on a number of factors. Ask your insurance agent or broker to determine what factors may modify this base rate. Only your agent can give you a modified estimate.
Do not underestimate your annual payroll to secure a lower premium rate. Insurance companies will audit your payroll to ensure the collection of proper premium. Notify your agent if your payroll makes a significant change throughout the year.
Just because an insurance company lists a premium rate on the rate tables does not mean they will issue a policy for that classification. Underwriting rules are always changing. Check with your agent to verify that a given company is writing policies for your business' class codes before applying for coverage.
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