Understanding Workers Comp Premium Audits

Workers’ compensation premiums, or the amount an employer pays to an insurance company in exchange for the carrier providing medical treatment and compensation to employees in the event of workplace accidents, are audited at the end of the policy term. Before the policy becomes effective, workers’ comp insurance companies prepare an initial estimate of premiums, based on the amount of payroll and the type of work the employer does, known as the “classification code”. Once the policy term ends, a premium audit is performed to account for any differences from the initial estimates. For example, if several employees left the company during the policy term and were not replaced, payroll would decrease and the amount the employer would pay to the insurance company would need to be adjusted. Also, if the type of work changed during the year, different classification codes may be utilized.

The Social Significance Behind Workers Comp Insurance

Workers’ compensation insurance, the nation’s oldest social insurance, protects employees and employers if an employee is injured while on the job. If employees get hurt or are sick because of work, an employer must pay workers’ compensation benefits, and those benefits are typically paid through insurance. Because this insurance affects nearly all California employers and employees, and it is often subject to disputes and litigation, it is important to understand what the insurance is, who must provide it, and how it works.