A contractor has a workers' compensation experience modification factor of 1.15. If the base premium is $12,000, what is the adjusted premium?
Correct Answer
A) $13,800
Adjusted premium = Base premium × Experience mod = $12,000 × 1.15 = $13,800
Why This Is the Correct Answer
The adjusted premium is calculated by multiplying the base premium by the experience modification (e-mod) factor: $12,000 × 1.15 = $13,800. An e-mod above 1.0 means the contractor has a worse-than-average claims history, resulting in a higher premium.
Why the Other Options Are Wrong
Option B: $12,150
$12,150 would result from adding only 1.25% or from a minor arithmetic error (e.g., $12,000 × 1.0125). This answer ignores the correct meaning of a 1.15 modifier.
Option C: $11,850
$11,850 would be the result if the modifier were 0.9875 (a credit modifier), meaning this option confuses a debit modifier with a credit modifier. An e-mod of 1.15 increases, not decreases, the premium.
Option D: $10,435
$10,435 would result from applying a significant credit modifier (approximately 0.87), which is the opposite of what a 1.15 debit modifier does. This answer would indicate a below-average claims history.
Memory Technique
E-mod = Expense modifier. Above 1.0 = more expensive (debit). Below 1.0 = discount (credit). Always multiply: Base × E-mod = Adjusted.
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