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

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!

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

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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