Workers’ compensation is regulated at the state level, meaning it’s all standardized and everyone pays the same rate as everyone else. Right? Well, of course that’s not the case. There are a number of factors that affect your own coverage, how much you pay and even how easy or difficult it is for you to get your coverage.
In the beginning, how much you pay and your ability to get 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 are in and the number of employees you have, you will also need to determine whether or not you need to carry this form of insurance.
Small businesses can also enlist the help and services of employee leasing companies to form part of their coverage, generally a much larger and more established platform. This generally helps reduce coverage costs.
All this though and we haven’t gotten to the point of this guide, which is worker compensation mod rates, one of the most important variables in determining how much you pay for your coverage. A new company generally receives a mod rate of 1.0. This only means that you pay 100% of the mandatory or regulated rate for your industry type.
Of course, the term modifier implies that this number will not always stay the same. Your rate may be reduced in subsequent years. For example, a.95 mod rate means you only have to pay 95% of the industry standard. The state and industry you are in will again affect how, when and to what extent your mod rate can change.
The modification rates for workers’ compensation could of course also go up, much to the chagrin of entrepreneurs. A rate of 1.15 mod means that you have to pay 115% of the standard rate. Such an increase is generally based on the number and severity or variety of reported incidents from the previous year or period reported.
In fact, if your rate rises high enough, you may struggle to get coverage. Several states have organizations or departments that then specialize in high-risk or hard-to-get workers’ compensation policies. That can get you covered, but you should brace yourself for the extra costs.
Understanding the mod rates on your employees’ compensation is another way to understand how much you are paying and for what reasons. Be sure to consult a licensed insurance agent or broker in your state if you have any questions about getting a new policy or shopping for a better deal.
How workers compensation mod rates affect you
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