Much of commercial insurance (especially liability coverage & all workers' comp) is priced as a percentage of your actual sales and/or payroll for the policy year. Shortly after expiration of your policy, you will be asked to submit a voluntary report from your own sales and/or payroll records, or you will have a visit from a field auditor to physically review your books.

This means that the initial premium you are quoted is merely an estimate of your actual cost.  A favorite game of some unscrupulous agents is to lowball your deposit premium to make it appear that you're getting a great deal. Unless you verify the actual rating percentage (Rate per $100 or per $1000) and payroll or sales estimate being used, you may find some time after the policy has expired that you owe a huge additional premium. By then, of course, it's too late.  The insurer has fully earned all of the premium, the agent has earned his commission, and you are stuck with the bill.  (And you've had a year to forget everything he said anyway.)  Insurance companies do make a habit of collecting these premiums because they are generally a slam-dunk legally.

The flip side is that if your actual figure is less than the one used on your initial deposit, you should pursue a refund of premium. (Certain policies may contain a minimum annual premium condition allowing the insurer to retain the entire deposit, even when your figures are below the estimate - a good type to avoid.)

Guaranteed cost liability policies without audits are available to most types of businesses, principal exceptions being manufacturers & contractors.


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