What is Class Code?
A class code is a numerical designation assigned to businesses based on the specific types of services or work they provide. In the context of insurance, especially commercial insurance, these codes are vital in assessing the level of risk associated with business operations. Each class code corresponds to a certain level of hazard or risk, which insurers use to calculate premiums for workers’ compensation, general liability, or property insurance.
Class codes ensure that businesses are properly categorized, allowing insurers to assess the correct level of exposure for their policies. For example, a construction company would have a higher class code than a clerical office because construction work involves more physical risks.
Accurate class codes are critical to avoid overpaying or underinsuring, as incorrect classification could lead to miscalculated premiums. In some cases, businesses may be audited to ensure that their assigned class codes match their actual operations.