Michigan Commercial Insurance 101: What Are The Workers Comp Rates In Michigan?

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Workers compensation insurance is a state-mandated coverage here in Michigan, meaning most businesses with employees are required to have it.

The first factor that goes into determining the cost is payroll. The more employees you have, the more you'll pay for workers comp. The insurance company takes your payroll and multiplies it by the rate associated with each employee's job duties.

This brings us to the next factor: class codes. Every type of employee you have gets assigned a class code based on their job duties. For example, if you’re a plumbing contractor, the workers doing the actual contracting will have one code, project managers and superintendents will have another,
Your office and clerical staff will be in a clerical class code, and salespeople will have their own. The payroll for each type of employee is multiplied by the rate for their specific class code, and that’s how your initial premium is calculated.

Another important thing to consider is the industry you're in and the class codes themselves. Some industries and jobs are inherently riskier than others, which impacts your rates. A construction company will generally pay more than an office-based business like a mortgage company because the chances of injury are higher.

On top of that, your business will also have an experience modification factor, sometime referred to as an e-mod, or simply mod, based on your claims history. A mod of 1.0 is seen as average for your class of business. If your mod is below 1.0, like .8, you’ll get a discount on your premium. If it’s above 1.0, you’ll pay more. So, for example, if your business has a .8 mod, you’ll pay about 20% less than if you had a 1.0 mod.

It’s also important to know that workers' comp insurance is subject to an audit at the end of the policy period. The insurance company will review your actual payroll numbers for the year. If your payroll was higher or lower than expected, your premium may be adjusted accordingly, which could mean you owe more or receive a refund.

To sum it up, payroll, employee class codes, your industry, and your claims history all play a major role in determining the cost of workers' compensation insurance.

If you need help or have questions about your insurance, please feel free to reach out!

I look forward to working with you!

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**DISCLAIMER: THIS IS NOT LEGAL ADVICE. USE AT YOUR OWN DISCRETION. THIS VIDEO INCLUDES MICHIGAN INFORMATION ONLY.