Workers' Comp Glossary
39+ plain-English definitions of the terms employers actually run into — class codes, E-Mod, ghost policies, assigned-risk pools, and more.
A
Assigned-Risk Pool
The last-resort insurance market for employers who cannot obtain coverage in the voluntary market — usually due to a high E-Mod, heavy claim history, or a high-hazard classification. Premiums are typically 20-50% higher than voluntary market rates. Also called the residual market.
Audit (Premium Audit)
An annual review by your workers' comp carrier to compare your estimated payroll at policy start with your actual payroll at year end. The auditor adjusts your final premium up or down and can reclassify workers, triggering a back-premium bill.
C
Certificate of Insurance (COI)
A one-page proof-of-coverage document you request from each subcontractor. Shows that sub has their own active workers' comp policy — if it's missing or expired at audit, the sub's payroll gets pulled into your policy at your class-code rate.
Claim
A formal request for workers' comp benefits after an on-the-job injury. Once filed, it generates medical bills, wage-replacement payments, and potentially permanent-disability awards — all of which influence your future premium via the E-Mod.
Class Code
A 3 or 4-digit number (usually NCCI) that classifies a worker's occupation by injury risk. Every class code has its own rate. Misclassification is the biggest lever for over- or under-paying on premium.
D
DART Rate
Days Away, Restricted, or Transferred — an OSHA metric measuring workplace injury severity. Not a workers'-comp rating factor directly, but correlates with E-Mod and carrier underwriter willingness.
Deductible
Rare in workers' comp. Most WC policies are first-dollar coverage (no deductible). Large-deductible programs exist for bigger employers who want to self-insure the first layer of claim costs in exchange for lower premium.
E
Employer Liability (Part B)
The second section of a workers' comp policy that covers lawsuits from injured workers (rare in states with strong WC exclusive-remedy laws), spouse or family consortium claims, and injuries to non-covered workers. Usually $100k/$100k/$500k minimums.
Experience Modification Factor (E-Mod)
A multiplier — calculated by NCCI or your state rating bureau — that compares your company's claims history to industry average. E-Mod above 1.0 raises your premium; below 1.0 lowers it. Uses 3 years of loss history.
F
FECA
Federal Employees' Compensation Act — the workers' comp program for US government civilian employees. Administered by the US Department of Labor. Applies instead of state WC for federal workers.
G
Ghost Policy
A workers' comp policy with zero payroll and zero employees, purchased to satisfy a general contractor or customer's certificate-of-insurance requirement. Legal for sole proprietors, but the moment you hire a W-2 worker, you must upgrade — ghost policies don't cover actual claims.
H
H-2A Workers
Temporary agricultural visa workers. Federal H-2A program rules require employers to provide workers' comp (or equivalent coverage) for these workers at no cost. Failure to comply can jeopardize your visa program.
I
Indemnity Benefits
The wage-replacement portion of a workers' comp claim — typically 66⅔% of the worker's average weekly wage, capped at the state maximum. Includes temporary total, temporary partial, permanent partial, and permanent total disability.
Independent Contractor vs Employee
The classification that determines whether a worker is on your payroll (employee) or invoicing you (1099 independent contractor). Auditors apply an ABC test or common-law test. Misclassifying employees as 1099 triggers back premiums at audit.
J
Jones Act
Federal law covering maritime seamen on vessels in navigation. A tort-based system (not no-fault like WC), meaning injured seamen can sue their employer in court. Applies instead of state WC for qualified maritime workers.
L
Longshore and Harbor Workers Act
Federal workers' comp program covering maritime workers who don't qualify as seamen (dockworkers, shipbuilders, harbor workers). Administered by DOL.
Loss Run
A carrier-produced report listing all claims during a policy period, showing payments made, reserves set, and claim status (open/closed). Essential for accurate underwriting at renewal — always request 3-5 years.
M
Monopolistic State
A state where workers' comp coverage must be purchased from a state-run fund — commercial carriers are not allowed. North Dakota, Ohio, Washington, and Wyoming are the four monopolistic states.
N
NCCI
National Council on Compensation Insurance — the private organization that creates class codes, rating plans, and loss-cost filings for most US states. Also publishes the annual E-Mod worksheet.
NPN (National Producer Number)
A unique number identifying a licensed insurance producer. Your agent's NPN is verifiable via NIPR — a good trust signal to look up before binding a policy.
Non-Subscriber (Texas)
An employer in Texas who opts out of the state workers' comp system. Non-subscribers forfeit tort-damage caps, meaning an injured worker can sue for unlimited damages in court.
O
OSHA 300 Log
The annual injury/illness log employers with 10+ employees must maintain. Posted publicly at the workplace from Feb 1 – Apr 30. Independent of WC but often correlates with claim severity.
Owner Exclusion
A state-permitted election allowing sole proprietors, LLC members, or corporate officers to exclude themselves from WC coverage. Reduces premium but forfeits benefits if the owner is hurt on the job.
P
PEO (Professional Employer Organization)
A co-employment arrangement where the PEO becomes the employer of record for WC purposes. Trades PEO-controlled premium for the administrative relief of not running your own WC program.
Payroll Cap
The maximum per-worker payroll used to calculate WC premium. Executives and certain high-paid roles are typically capped at ~$2,600-$5,200/week depending on the state, preventing their actual payroll from inflating the premium.
Performance Bond
A surety bond guaranteeing a contractor will complete a public or commercial project. Not workers' comp, but often required alongside WC for government contracts.
R
Rate Filing
The loss-cost or full-rate schedule a carrier files with a state DOI for approval. Rates vary meaningfully by carrier even for the same class code in the same state — why shopping matters.
Reserves
The dollar amount a carrier sets aside on an open claim for future payments. Reserves inflate your E-Mod. Challenging over-reserved open claims is a real cost-reduction lever — most employers never do it.
Return-to-Work Program
A structured light-duty accommodation for injured workers. Shortens indemnity payments (which hit your E-Mod harder than medical-only claims) and keeps the worker earning while they recover.
S
SIC / NAICS Code
Industry classification codes used by IRS and OSHA, but NOT for WC pricing — WC uses NCCI or state-specific class codes. Don't confuse the two at audit.
Stop-Work Order
A state-issued shutdown of an uninsured employer's operations until coverage is obtained. Typical in construction. Daily fines accrue until the order is lifted.
Subcontractor
A worker or firm you hire under contract who is not your employee. Proper subs carry their own WC and hand over a COI; improper subs get pulled into your audit.
Subrogation
The carrier's right to recover claim payments from a responsible third party. If another company caused your employee's injury, your carrier can recover from them — reducing your long-term loss run.
T
Third Party Administrator (TPA)
A company that handles claims administration separately from the insurance carrier. Common on large-deductible programs. Good TPAs reduce indemnity spend and closure time.
Total Cost of Risk (TCOR)
The sum of premiums, deductibles, uninsured losses, safety-program investment, and administrative costs. Better broader measure than premium alone for evaluating WC programs year over year.
V
Voluntary Market
The normal commercial WC market — any licensed carrier that voluntarily offers coverage in your state. Contrasted with the assigned-risk / residual market.
W
WC Insurance Certificate Verification
The process of validating a subcontractor's COI — confirming the policy is active, named insured matches, and expiration date covers the work period. Critical pre-project step.
Waiting Period
The number of days an injured worker must be off work before indemnity benefits start paying. Usually 3-7 days depending on the state. Medical benefits have no waiting period.
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