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WHAT IS THE BEST WAY TO PAY INSURANCE PREMIUMS IF YOU HAVE A FLUCTUATING PAYROLL?

Updated: Jan 23






DEPOSIT PREMIUM OR FORECASTED PREMIUM


On a new or a renewal Workers' Compensation policy, the normal procedure is to estimate payroll in each applicable classification and pay a deposit premium. At the end of the policy period, the actual payroll is determined and an adjusted premium is determined. This is known as a premium audit.


  • An additional premium is billed if payroll is underestimated by classification(s).

  • A refund is given if payroll was overestimated by classification(s).


Not reviewing and updating data for a year could give you a pocketbook attack!




Many insurance companies have multiple premium payment options

on the deposit premium:


monthly

quarterly

semi-annual

annual





The best pay plan for businesses that have fluctuating payrolls (or significant payrolls) is a Monthly Reporting Form. This pay plan allows the insured to remit premiums based on actual wages incurred. This format could be thought of as a pay-as-you-go plan. It is the best cash flow pay plan available. It is awful for a business to be saddled with a fixed premium on a monthly basis when there has been no work performed. What bookkeepers and business owners like best about a properly understood Monthly Reporting Form is... NO SURPRISES!



 

Audited Premium or Final Premium will be explored in an upcoming blog.


 


Chris Cain, CWCP
Chris Cain, CWCP

ABOUT CHRIS


Current

  • Host of Work Comp Chaos | licensed in multiple states as both an insurance adjuster & agent

  • Vice President of The Southern Agency in charge of Operations and Claims

  • United Heartland Insurance Company Claims Advisory Council


Prior

  • State of Tennessee Telehealth Advisory Committee assisting in developing rules and statutes

  • Utilization Review Advisory Committee

  • Past President of the Tennessee State Claims Association

  • Served 15 years as President of the Chattanooga Claims Association







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