As employees' activities pose greater risks of injuries, rates increase. Like automobile insurance, companies suffering numerous WC injuries pay higher premiums. When WC is purchased, an estimated premium is paid based on an estimated payroll. When the policy lapses the actual premium is determined based on the actual payroll. WC Classifications and Terminology States often distinguish the risks of various types of work through a system of classification.
Most business have more than one classification of work.
WC rates vary widely by classification. The amount of payroll for a specific classification is called an exposure and the classification with the greatest exposure is the governing exposure. This is true even if a specific classification describes the activities of miscellaneous employees. General inclusions are always included in the governing classification. Conversely, general exclusions are always rated separately.