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.
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