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A $20,000 workers' compensation insurance premium is significantly higher than the national average. Several factors can contribute to such a considerable cost. Understanding these is the first step towards managing and perhaps reducing your workers' compensation expenses. Premiums aren't arbitrary; they're directly tied to risk.
Key Factors Driving Up Costs
- Industry Risk Classification: High-risk industries (construction, manufacturing, trucking) inherently have higher premiums.
- Payroll: Premiums are often calculated as a percentage of payroll. Higher payroll generally means higher premiums.
- Experience Modification Rate (EMR): This is a crucial factor. An EMR above 1.0 indicates a higher-than-average claim history, leading to increased costs. A poor EMR can dramatically increase premiums.
- Claims Frequency & Severity: More frequent claims, and especially claims with high medical costs or lost-time incidents, drive up premiums.
- State Regulations: Workers' compensation laws vary significantly by state, impacting costs.
- Business Size: Smaller businesses frequently enough pay higher premiums per employee due to limited bargaining power.
Your premium isn't just a single number. It's comprised of several components. Understanding these can help you identify areas for potential savings. Consider a breakdown like this:
| Component | Description | Typical percentage |
|---|---|---|
| Base Rate | Rate steadfast by your industry classification and state. | 40-60% |
| Payroll | total taxable payroll for all employees. | 30-50% |
| Experience Modification (EMR) | Adjustment based on your claims history. | Variable (can significantly increase or decrease) |
| State Funds/Assessments | Fees levied by state workers' compensation funds. | 5-10% |
Strategies to Reduce High Work Insurance Costs
don't resign yourself to exorbitant premiums. Proactive steps can
