What is the unit of exposure for payroll in workers' compensation insurance?

• A. Fifty dollars of payroll
• B. One hundred dollars of payroll
• C. One thousand dollars of payroll
• D. One dollar of payroll

Answer: (B)

The main idea is that workers’ compensation premiums are based on payroll exposure, measured in units of $100 of payroll. Rates are quoted per $100 of payroll, so you determine the number of exposure units by dividing the total payroll by 100, then multiply by the rate per $100 to get the premium. For example, if the payroll is $50,000 and the class rate is $3 per $100, the premium is 500 exposure units times $3, equal to $1,500. That’s why the unit used is one hundred dollars of payroll. The other options don’t align with how exposure is standardly calculated in workers’ comp.