When it comes to Workers’ Compensation Insurance, many business owners are surprised by how much rates can vary. Two companies in the same city — even in the same industry — might pay very different premiums.
That’s because your Workers’ Comp costs are based on several key factors, including your industry classification, payroll, claims history, and state regulations. Understanding how your premium is calculated can help you save money and avoid surprises at audit time.
1. Your Industry Classification Code (Class Code)
Every employee type is assigned a classification code that represents the level of risk involved in their work.
For example:
- A carpenter or roofer is considered high-risk.
- A receptionist or office clerk is considered low-risk.
The higher the risk of injury, the higher the rate per $100 of payroll. Each state’s Workers’ Comp board sets base rates for these codes, which insurance carriers adjust based on their own data and experience.
💡 Tip: Misclassifying your workers can cause you to overpay — or owe more after an audit. Make sure your class codes are correct.
2. Your Total Payroll
Your Workers’ Comp premium is largely based on your estimated annual payroll.
The formula looks like this:
Premium = (Payroll ÷ 100) × Class Code Rate × Experience Modifier
Example:
If your carpenter’s class code rate is $5.00 and you have $100,000 in payroll:
($100,000 ÷ 100) × $5.00 = $5,000 base premium
At the end of the policy term, your insurer will audit your actual payroll. If it’s higher than estimated, you may owe more — if it’s lower, you may get a refund.
3. Experience Modification Factor (MOD)
Your Experience Modification Factor (MOD) reflects your claims history compared to other businesses in your industry.
- A MOD of 1.0 means your claims are average.
- Below 1.0 (like 0.85) earns you a discount for fewer claims.
- Above 1.0 (like 1.20) means higher premiums due to frequent or severe claims.
Keeping a safe workplace and reporting injuries promptly can help lower your MOD — and your overall Workers’ Comp costs.
4. State Laws and Rates
Each state regulates Workers’ Comp differently, setting minimums, rates, and required coverages.
Upstate’s Choice Insurance serves businesses in South Carolina, North Carolina, and Georgia, and we see firsthand how rates can vary between states.
For example:
- North Carolina has strict classification rules and often lower base rates.
- South Carolina uses its own state rating system.
- Georgia rates depend on NCCI guidelines but allow carrier competition for better pricing.
Knowing your state’s rules helps ensure you’re fully compliant and not overpaying.
5. Claims History and Safety Programs
Your safety record directly affects your premium.
Businesses with fewer claims and active safety programs often qualify for:
- Lower MOD scores
- Policy credits or discounts
- Preferred carrier programs
Investing in training, PPE, and safety audits can save you thousands over time.
Simplify Workers’ Comp with the Right Partner
At Upstate’s Choice Insurance, we help business owners across South Carolina, North Carolina, and Georgia understand their Workers’ Comp premiums — and reduce them wherever possible.
Our independent agents compare rates from top carriers and help you:
- Verify correct class codes
- Estimate payroll accurately
- Implement safety strategies to lower your MOD
- Avoid audit surprises
💼 Let’s make Workers’ Comp simple — and affordable. Get your free quote today!
📍 www.upstateschoice.com