Four Quick Tips on Workers' Compensation Classifications
An employer’s best self-defense against incurring a large additional premium during an audit is to obtain adequate guidance regarding how to properly classify exposures for workers’ compensation coverage. Assigning the correct code gives you a better indication of the type of job you are assigning a temporary employee, the risks associated with it and the resulting claims that can occur.
If you’re using the wrong code, you’re not getting an accurate depiction of losses and have less of a chance of properly managing risk. This can affect your experience modification rating, which in turn, impacts premium.
Here are four quick tips on workers’ compensation classification codes.
1. The class code is determined based on your client’s operations. Although it’s technically your employee, they’re working at your client’s facility; therefore, the class code will be determined based on the client’s operations, work environment, job description, etc.
2. Workers’ compensation rates vary from state to state. The class code rates will vary depending on the state. Although your employees might be performing the same exact jobs in multiple states, the rates will change based on the state that the employee is working in.
3. Incorrect classifications can impact your year end audit. When the auditor reviews your client list, employee job description and actual payrolls based on the estimates given at the beginning of the policy period, they’ll review and confirm that the class codes listed on the policy are accurate. If you don’t have the correct classifications listed, the auditor will re-classify the placement. This could result in additional premium.
4. It’s important to check with your insurance carrier before adding a new class code. Generally speaking, insurance carriers have lists of class codes they consider eligible or ineligible based on the exposure that the job presents. It’s important to confirm the carrier is comfortable with that classification before making the placement. This helps avoid a claim being denied or a carrier offering a non-renewal.
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