What is used as the premium base for WC&EL policies?

• A. Employer safety rating
• B. Number of employees
• C. Accidents per year
• D. Employee payroll

Answer: (D)

Premium base for WC&EL policies is the employee payroll. The insurer uses the amount of payroll exposed to coverage as the measurement of risk, applying rates set for each job class per $100 of payroll. Multiply those class rates by the total payroll to determine the base premium. After the policy is issued, an audit may adjust the premium to reflect actual payroll, and an experience modification factor can increase or decrease the final amount based on the employer’s claims history and safety performance. The other options don’t fit because the exposure basis is payroll, not the number of employees or accidents per year, and while safety ratings affect the premium, they do so through the modification factor rather than the base itself.