For each line of coverage coverage (the type of policy, e.g. Property; General Liability;
or Auto) the insurance company files rates in each state. Also,
for each type of coverage there is an "exposure basis"
that is used. The rate multiplied by the exposure basis equals the
premium.
Example
For Property insurance the
exposure basis is the value of the property insured. A rate of
$0.20 per $100 of value (20 cents) would result in a premium of
$16,000 for a building (Property) worth $8,000,000.
Property and Marine insurance is based on
value of the property insured and the rates are per $100. For
General Liability and Professional Liability the rates are per
$1,000 of revenue or payroll.
EXPOSURE BASIS
Exposure Basis for different types
of insurance (varies sometimes by carrier). In all cases the limit
of insurance selected also affects the rate and resulting premium:
| Coverage |
Exposure Basis |
Typical Rates/Premiums* |
| Property |
The replacement value of the property (which
usually becomes the limit of insurance). |
$0.20 per $100 for buildings$0.30 per $100
for business personal property (contents) |
| Inland Marine and Ocean Marine (which generally
refer to a number of different types of coverage). |
The value of the items insured. |
Example:$0.10 per $100 for Transit insurance.
Higher for international shipments |
| General Liability |
Revenue or total payroll of the insured |
$0.50 per $1,000 |
| Errors & Omissions (E&O; a/k/a Professional
Liability |
Revenue of the insured |
$1.00 per $1,000 |
| Workers Compensation |
Annual Payroll in each class
Employees are placed in classifications based on their
job duties. Class descriptions and codes vary by state but
a typical one is "8810 - Office Clerical Workers; Not
Otherwise Classified". Each class has a different code. |
There are over 600 WC classifications and the rates vary
for each class in each state. Rates are per $100 of annual
payroll in the class.
| Class |
Rate Per $100 |
| 8810 |
.25 - 1.25 |
| 8742 |
.40 - 1.60 |
| 5191 |
1.75 - 5.00 |
|
| Commercial Auto |
Value of the vehicle for the Physical Damage
coverage and the use of the vehicle, and the limit selected,
for the Liability coverage. |
$400 for Physical Damage and $900 for the
Liability coverage. Varies widely by state and usage of vehicle. |
| Umbrella |
% of the underlying General Liability premium;
the Auto premium; and the Employers Liability coverage under
Workers Compensation. |
Average of $1500 per $1 million of limit
selected, declining as limits increase. $7,000 for a $5 million
Umbrella limit for a company with a $9,000 |
| Employee Dishonesty |
# of employees overall, # who control cash
and checks, and the limit selected. |
$750 for a $250,000 limit |
| Directors & Officers Liability |
Strength of financial statements, # of shareholders,
limit selected |
$5,000 for a $1,000,000 limit (private company)$25,000
for a $1,000,000 limit (public company) |
*Rates vary widely by carrier and are affected
by the characteristics of the insured's operations. Provision
of these "typical rates" is for educational purposes
only and does not constitute an offer of coverage |
