Class code
Also called Classification code
Definition
A class code is a number insurers use to classify what your business does, so your rates reflect the typical risks of businesses doing similar work.
How it works
Insurers group businesses with similar operations and set rates for each group based on the losses that kind of work tends to produce. Your class code places you in a group. A coffee shop, a roofing crew and an accounting office land in very different classes, because the injuries and claims they see are very different.
In workers’ comp, NCCI publishes the classification system that many states use. NCCI describes the classifications in its Basic Manual as its official categorization of workers by occupation and industry, and the manual includes more than 600 of them. Under this approach, called manual rating, employers in the same class share an average rate, and the rate for each class is applied to the payroll for that work to build your premium. Rules and code lists vary by state, and some states use their own rating organizations.
General liability uses a separate set of class codes, and those are often rated on a measure like sales or payroll.
Why the right code matters
A wrong code means a wrong price. Too low, and you could face a bill when the insurer catches it at a premium audit. Too high, and you overpay. A business with very different kinds of work, such as office staff and field crews, may have more than one class code.
Where you’ll see it
Class codes appear on your quote and, for workers’ comp, on the policy’s information page next to estimated payroll. Describe what your business actually does when you get a quote, and update your insurer if that changes.