Georgia Adjuster Practice Test

The manual premium under a workers' compensation policy is primarily based on which of the following factors?

1. The number of employees

2. The classification of work the employees perform

3. The overall revenue of the company

4. The geographical location of the business

The correct answer is: The classification of work the employees perform

The manual premium under a workers' compensation policy is primarily determined by the classification of work that employees perform. This classification reflects the type of activities carried out by the employees and the associated risks linked to those activities. Different types of work inherently carry different levels of risk for workplace injuries and illnesses. For instance, jobs that involve manual labor or hazardous environments may have higher premiums compared to those that are less dangerous, like office work. Insurers use these classifications to assess and assign appropriate rates for coverage. Each classification corresponds to a specific rate that accounts for the likelihood of claims associated with that type of work. Hence, understanding the classification system is crucial for calculating the correct amount of premium that a business must pay for its workers' compensation policy.