Workers compensation is regulated on a statewide level, which means that it’s all standardized and everybody pays the same rate as everybody else. Right? Well, of course that’s not the case. There are a number of factors which impact your own coverage, how much you pay, and even how easy or difficult it is for you to obtain your coverage.
At the start, how much you pay and your ability to obtain workers compensation coverage is determined by factors such as your industry classification, whether this is a new or established business. Depending on the state you’re in and how many employees you have, there’s also the determination of whether or not you are required to carry this form of insurance to begin with.
Small businesses may also seek out the assistance and services of employee leasing providers to become a part of their coverage, generally a much larger and more well established platform. This generally helps to reduce the expense of coverage.
All of this though and we haven’t gotten to the point of this guide, which is workers compensation mod rates, one of the most important variables for determining how much you pay for your coverage. A new business generally receives a mod rate of 1.0. All this means is you pay 100% of the mandated or regulated rate for your industry type.
Of course, the term modifier implies this number won’t always stay the same. Your rate can be lowered in the years that follow. A.95 mod rate, for instance, implies you only need to pay 95% of the industry standard. The state and industry you’re in will once again impact how, when, and to what degree your mod rate can change.
Workers compensation mod rates can then also go up, of course, much to the chagrin of business owners. A 1.15 mod rate implies that you have to pay 115% of the standard rate. Such an increase is typically based on the number and severity or variety of reported incidents from the previous year or reported time period.
If your rate goes up high enough, that’s when you may even find difficulty obtaining coverage. Different states have organizations or services that then specialize in high risk or hard to obtain workers compensation policies. That might help ensure you get covered, but you’ll have to brace for the added cost.
Understanding the mod rates on your workers compensation is one further way to understand how much you’re paying, and for what reasons. Be sure to consult with a licensed insurance agent or broker in your state if you have any questions about obtaining a new policy or shopping for a better deal.