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