Glossary

Exposure base

The measure of a business's size or activity, such as payroll, sales or square footage, that is multiplied by a rate to produce a premium.

Also called: rating basis, premium base, rating unit, exposure unit

An exposure base is the unit insurers use to measure how much risk you present, and so how much to charge. Premium is generally exposure units times a rate, then adjusted by modifiers such as an experience mod or schedule credits and debits.

The base depends on the line. Workers' compensation uses payroll per $100, and so do many contractor classes in general liability. Retailers, restaurants and many manufacturers are rated on gross sales per $1,000. Landlords are often rated on area or units, and commercial auto on the number of vehicles. Say a contractor has $500,000 of payroll in a class with an illustrative rate of $3.00 per $100 (the rate is invented for the arithmetic). That is 5,000 units x $3.00 = $15,000.

Because the base is an estimate when the policy starts, the final premium is trued up at audit. The auditor works from payroll records, tax filings, sales tax returns and certificates for subcontractors. Understating the base to cut the deposit premium only produces a larger bill later, and a deliberate understatement can become a misrepresentation problem. Overstating it ties up cash until the audit returns the difference.

Review each base every renewal, and report big changes midterm. how commercial insurance premiums are calculated shows the whole formula, and premium audits: how they work and how to prepare explains how to prepare for the true-up.

Last reviewed October 10, 2026

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Related terms

Premium audit The insurer's after-the-fact review of payroll, sales or other exposures that replaces the pricing estimates, producing an additional or return premium. Class code The numeric code that classifies a business's operations for rating, setting the workers' compensation rate per $100 of payroll. Ordinary payroll In a business income policy, rank-and-file wages and related costs that coverage can keep paying during a shutdown, often for a limited number of days. Written premium The total premium on policies an insurer issues or renews in a period, counted when written, whatever share of the coverage period has passed. Schedule rating An underwriter's credits or debits to manual premium for risk traits that manual rates miss, such as premises condition, safety program or management quality.

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