GT Insurance Blog

Insurance problems and cures

Workers Compensation Insurance Premium Credit

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Our thanks to Acadia Insurance for the following:
Most contractors know that workers compensation insurance premiums are based on payroll. However, many do not know that 20 states allow a “Contractors Premium Credit Adjustment” if the hourly wage level exceeds the state hourly average wage. (See list of states below.) Contractors paying union scale will almost always qualify for the credit. The size of the credit varies, but in most states, eligible contractors can earn a credit of anywhere from 5 percent to 40 percent, and discounts of 20 percent or more are not uncommon. Most states use a formula based on the state average weekly wage to determine the size of the credit; however, six states determine the credit from a table. This is a credit only, never a debit.

States allowing a Contractors Premium Credit Adjustment are Alaska, Connecticut, Delaware, Florida, Hawaii, Illinois, Maryland, Massachusetts, Minnesota, Missouri, Montana, Nebraska, New Jersey, New Mexico, New York, Oklahoma, Oregon, Pennsylvania, Virginia, and Wisconsin. To qualify, most states require at least 50 percent of the policy premium to be in construction codes. Connecticut, Illinois, and Oregon require the contractor to have an experience modifier below 1.0 in order to be eligible for the credit. The credit must be verified during the premium audit, so contractors must be diligent to maintain relevant documentation to ensure the credit will be upheld.

The Contractors Premium Credit Adjustment can be obtained by completing a simple application form supplied by the National Council on Compensation Insurance (NCCI) or the appropriate independent state bureau. Because the credit applies on a per-state basis, eligible contractors operating in one of these states can take advantage of the credit, even if they also have operations in other states that do not allow the credit. Contractors should contact their agent or broker to determine if they are eligible for, or receiving, this credit.

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