Measuring the Total Value of a Workers’ Compensation Policy

The law regulates certain components of Workers’ Compensation coverage, including benefits, coverage terms, and limits of liability. In this regard, all Workers’ Compensation policies are created equal, and therefore, offer the same value. However, beyond the regulated components, many other variables determine the total value of a Workers’ Compensation policy. These variables include:


Premium is the total cost of a policy. It is a product of three variables assigned to an employer. These variables include:

  • Payroll – For every $100 of payroll, the employer pays a certain amount of money for Workers’ Compensation depending on each employee’s classification code.
  • Experience modification factor – Also known as e-mod or Mod, this indicator compares a business with competitors that have the same employee classifications. The insurer determines this number based on factors such as the number, severity, and frequency of previously-made claims, as well as the age of a business. The average e-mod is 1.0. More severe or frequent claims push this number higher than 1.0, while fewer claims lower it below 1.0. Generally the higher the Mod the higher the policy cost.
  • Employee classification rate – This is a 3 or 4-digit code that the insurance provider uses to determine the cost of insurance depending on the type of work that the employee performs. For risky jobs such as those in the construction industry, the employer typically pays more for Workers’ Comp than administrative jobs.

Safety Consultation Services

In the event of a workplace accident, the employer can transfer the resulting losses to the insurance company by filing a Workers’ Compensation claim. Insurers generally use various strategies to reduce their risk exposure, including offering safety consultation services. To this end, insurers work with businesses to identify and manage workplace risks and hazards, creating a win-win situation for both parties.

Money-Saving Programs

In general, maintaining safety at the workplace may be costly depending on the size of the risk at hand. Even so, these costs are much less, compared to the losses that the employer will likely incur if the risks are not eliminated. The good news is employers can leverage workplace safety grants to improve workplace safety. Most states have workplace safety programs where employers can access grants and benefits that enable them to enhance their workplace safety.

Special Claims Services

Poor management of Workers’ Compensation claims can result in additional costs. For instance, every state has a stipulated deadline within which employers need to report the injuries and file their Workers’ Compensation claims. Failure to meet the deadlines can result in an increase of up to 51% of the Workers’ Compensation costs. Conversely, special claims services, including training, investigations, and special claim reviews, can help increase the value of a Workers’ Compensation policy.

Medical Bill Processing Savings

Every Workers’ Compensation insurer has a network of medical providers from which policyholders can seek treatment. Depending on the size and type of this network, policyholders can oftentimes access more affordable healthcare and save on their medical bills. This enables insurance companies to save on their expenses while reducing the employers’ premiums. A wide network of medical providers usually translates to a more valuable Workers’ Compensation policy.

Beyond the regulated variables, the total value of a Workers’ Compensation policy depends on its specific components. For more risk management tips and strategies for protecting a business, contact our PMC Risk Management team or Workers’ Compensation experts at 781-449-7744 or

By PMC Insurance Group

Since 1996, PMC Insurance Group has worked to help independent agents grow their client base by offering workers' compensation solutions for a wide array of businesses. As one of the most distinguished workers' compensation wholesalers in the country, we have the tools and resources to help you create coverage programs for small businesses and large accounts.