June 29, 2018

How Are Workers Compensation Insurance Determined in Massachusetts?

As is the case with most forms of insurance, a number of different considerations are taken into account when workers compensation insurance rates are calculated. If you run a business in Massachusetts, here are five factors that likely influence what your business pays for workers comp insurance.

How Do Massachusetts Insurers Determine Workers Compensation Insurance Rates?

How Much Your Business Pays Employees

Payments for workers compensation claims are normally based on employees’ salaries, with employees usually receiving a percentage of their salary if they have a valid claim.

Therefore, how much your business pays employees directly impacts how much an insurer might have to pay if an employee files a claim. The higher your employees’ salaries, the more an insurer may have to pay.

For this reason, insurance companies frequently assess businesses with highly paid employees higher workers compensation insurance rates than businesses with employees who make less pay (assuming all other factors are equal).

Your Employees’ Job Classifications and the Corresponding Rates

When purchasing workers comp insurance, employees are classified according to the type of work they do. For example, plumbers, office administrators and food service workers would likely all be put into different classifications.

These classifications help insurers quantify the risk they assume by covering employees. Each classification is assigned a rate per 100, which is a set amount that businesses must pay for every $100 of remuneration.

For example, if your business’ classification has a rate per 100 of 0.98, your business would pay $0.98 for every $100 of payroll. Insuring an employee who made $50,000 annually at this rate might cost around $490. (This isn’t an exact price, as other factors would affect how much insuring this employee cost. The example is only intended to show how a classification’s rate per 100 affects a business’ workers comp insurance premiums.)

Your Business’ Claims History

Many insurers consider a business’ workers compensation claims history. This helps insurance providers get an accurate picture of how safe (or unsafe) a particular business is.

If your business has a history of workers comp insurance claims, expect to pay more for coverage than businesses that don’t have a claims history.

Any Discounts Your Business Qualifies For

Workers comp insurance rates are fairly standardized in Massachusetts, but there are a few discounts that businesses might qualify for. Some insurers may offer discounts for:

  • Performing safety audits
  • Offering safety training
  • Proactively enforcing safety protocols
  • Making a workplace drug free
  • Hiring a risk management firm to assist with safety measures

In many cases, implementing these practices costs little yet provide noticeable savings.

(The exact discounts that insurance companies offer varies, so you should ask your insurance agent what discounts your business’ particular insurer makes available.)

An End-of-Policy Audit

An end-of-policy audit doesn’t technically change how much your business pays for workers comp insurance, but it serves to confirm that your business paid the right amount. When a workers compensation policy is purchased, the premiums assessed are estimated. When the policy terminates, the business’ payroll is audited to make sure the estimate was accurate. Any appropriate adjustments are assessed in the form of a bill or refund.

Work with a Massachusetts Insurance Agent to Find Workers Compensation Insurance

Because many factors affect your Massachusetts business’ workers compensation insurance premiums, it’s important to work with an independent agent when looking for coverage. An independent agent can help you compare quotes from any insurer in the state, so you can find the policy that treats your business’ particular factors most favorably.

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