General liability insurance is a type of insurance policy that protects businesses from financial loss due to property damage, bodily injury, or personal and advertising injury caused by the business operations.
The premium for general liability insurance is based on a number of factors, including the level of risk associated with the business operations and the coverage limits selected.
In order to accurately determine the premium, insurance companies use a system of codes known as premium basis codes.
General Liability Premium Basis Codes
Premium basis codes are used to categorize businesses and their operations based on the level of risk associated with them.
The codes are used to determine the appropriate premium rate to charge for general liability insurance coverage.
Each code corresponds to a different type of business operation or risk factor, and the insurance company will use the appropriate code to calculate the premium for a particular policy.
The premium basis codes are typically based on the classification system developed by the National Council on Compensation Insurance (NCCI) or the Workers’ Compensation Insurance Rating Bureau (WCIRB).
These organizations classify businesses based on their industry and specific operations, and assign them a corresponding code that reflects their level of risk.
Here are some of the most common premium basis codes and what they represent:
Class Code 9015 – Building or Property Management: This code is used for businesses that manage or maintain properties, such as property management companies or building maintenance contractors.
The premium rate for this code is generally lower because these businesses typically have lower risk exposures.
Class Code 9220 – Parking Lot Operation: This code is used for businesses that operate parking lots or garages, such as valet parking services or parking lot management companies.
The premium rate for this code is higher than for building or property management because of the increased risk of property damage or bodily injury associated with vehicle operations.
Class Code 8742 – Sales or Installation of Carpets or Rugs: This code is used for businesses that sell or install carpets or rugs, such as carpet cleaning services or flooring contractors.
The premium rate for this code is lower than for parking lot operation because the risk of property damage or bodily injury is generally lower.
Class Code 5022 – Masonry: This code is used for businesses that specialize in masonry work, such as bricklaying or stonemasonry.
The premium rate for this code is higher because of the increased risk of property damage or bodily injury associated with working with heavy materials and tools.
Class Code 5190 – Electrical Wiring: This code is used for businesses that specialize in electrical wiring, such as electricians or electrical contractors.
The premium rate for this code is higher than for masonry because of the increased risk of property damage or bodily injury associated with electrical work.
It’s important to note that these codes are not set in stone and may vary depending on the insurance company and state regulations.
Insurance companies may also use additional codes to further classify businesses and their operations.
In addition to the premium basis codes, there are other factors that can affect the premium for general liability insurance, such as the business’s claims history, coverage limits, and deductibles.
Businesses with a history of claims or high-risk operations may be charged a higher premium, while businesses with lower risk operations may be charged a lower premium.
To obtain general liability insurance coverage, businesses should work with an insurance agent who can help them understand the premium basis codes and how they apply to their specific operations.
By selecting the appropriate code and working with the insurance company to ensure accurate classification, businesses can obtain the coverage they need at a reasonable cost.
Final Words
In conclusion, premium basis codes are a critical component in determining the premium for general liability insurance coverage. These codes are used to categorize businesses and their operations based on the level of risk associated with them.