In general, what is the premium base for workers compensation insurance?

In general, what is the premium base for workers compensation insurance?

• A. Employees' salaries
• B. Payroll
• C. Company profits
• D. The number of claims

Answer: (B)

The premium base for workers' compensation insurance is determined by payroll. This is because workers' compensation insurance is designed to cover medical costs and loss of income due to work-related injuries or illnesses. The amount of coverage needed—and consequently the premium—is directly linked to the total payroll of the organization. The higher the payroll, the greater the exposure to potential claims because it often correlates with the number of employees and their associated risks. In setting premiums, insurers calculate rates based on the industry classification and the payroll size, allowing them to assess the risk level properly. As such, payroll serves as the most significant metric for determining how much an employer needs to pay for coverage.

The premium base for workers' compensation insurance is determined by payroll. This is because workers' compensation insurance is designed to cover medical costs and loss of income due to work-related injuries or illnesses. The amount of coverage needed—and consequently the premium—is directly linked to the total payroll of the organization. The higher the payroll, the greater the exposure to potential claims because it often correlates with the number of employees and their associated risks.

In setting premiums, insurers calculate rates based on the industry classification and the payroll size, allowing them to assess the risk level properly. As such, payroll serves as the most significant metric for determining how much an employer needs to pay for coverage.