Question 1

How is workers comp insurance calculated?

Accepted Answer

Workers comp premiums are calculated as: (Annual Payroll / 100) x Class Rate x Experience Modifier. The class rate is set by NCCI (National Council on Compensation Insurance) based on the risk level of the job classification. The experience modifier (X-Mod) adjusts for your specific claims history.

Question 2

What is an experience modifier (X-Mod)?

Accepted Answer

The experience modifier compares your actual claims history to the expected claims for businesses in your industry. An X-Mod of 1.0 is average. Below 1.0 means fewer claims than average (discount on premium). Above 1.0 means more claims than average (surcharge). X-Mods typically range from 0.5 to 2.0.

Question 3

What are NCCI class codes?

Accepted Answer

NCCI (National Council on Compensation Insurance) assigns 4-digit class codes to job types based on their injury risk. Office workers (8810) have very low rates around $0.18 per $100 payroll. High-risk jobs like logging (8227) can have rates of $25+ per $100 payroll. Misclassifying employees can result in significant premium adjustments at audit.

Question 4

Is workers comp required for all businesses?

Accepted Answer

Workers compensation requirements vary by state. Most states require coverage for businesses with 1 or more employees, though some states exempt very small employers or specific industries. Sole proprietors and partners are often exempt but can opt in. Penalties for non-compliance can include fines, stop-work orders, and personal liability for injury claims.

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