What's a Class Code in Workers Compensation?

In workers comp, a class code is a number that helps set insurance premiums for businesses. Here's a simpler breakdown:

What Are Class Codes? 

Class codes are numbers assigned to different jobs and industries based on risk. For example, a construction worker has a different code than an office worker because their jobs have different risk levels.

Why Do We Have Class Codes? 

Class codes make sure insurance costs are fair. Riskier jobs mean higher premiums, while safer jobs cost less. This way, the financial burden of workplace injuries is spread out fairly.

Here’s an example: Imagine you run a small construction company. Your workers are involved in physically demanding tasks and use heavy machinery. You also have an office manager who handles scheduling and payroll in an office setting.

Because of the higher risk of injury, the payroll associated with your construction team will be attached to a different class code than your office manager’s. The rate you pay for those working on a job site will be higher than your employee working in an office setting with lower risk.

How Are Class Codes Used? 

Insurance companies use these codes to figure out premiums. They consider job risks, like physical demands and potential hazards, to set accurate rates.

Finding Your Class Code 

If you own a business, knowing your class codes is crucial. Your insurance agent can help you determine your class codes and you can verify using resources like the National Council on Compensation Insurance (NCCI) website. Some states have their own state-specific codes too. Understanding your class code helps manage your insurance costs and ensures proper coverage.

What Happens If Your Business Is Improperly Classified?

If your business is classified incorrectly, it can lead to several issues:

• Big bills at the end of your term: Every workers compensation policy receives a premium audit at the end of the term to ensure that the premium you paid matched your payrolls and exposures. If you don’t have the proper class codes listed, you can end up with a large bill because you’ve actually underpaid throughout the term. 
• Higher Costs: You might end up paying more than necessary if your business is classified as higher risk than it actually is.
• Penalties and Fines: Misclassification can result in fines and penalties from regulatory bodies.

For BerkleyNet Policyholders: You can find your class codes in your policy documents by logging into the portal.

Class codes are key in making sure insurance costs are fair and risks are accurately assessed. By understanding them, businesses can better protect their employees and manage insurance expenses.