Glossary

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.

Also called: payroll audit, final audit, insurance audit, audit premium

Workers' compensation and general liability premiums are written on estimates of payroll or sales, so the premium you pay up front is a deposit. The premium audit, usually done after the policy expires, replaces the estimate with actual figures. The ISO CGL form (CG 00 01) calls advance premium a deposit only and gives the insurer the right to audit; the standard NCCI workers' compensation policy (WC 00 00 00) has a similar premium section and requires you to keep records.

Say a contractor estimates $400,000 of payroll in a class rated at $8.00 per $100 of payroll (a hypothetical rate). The audit finds $520,000. The extra $120,000 of payroll costs $120,000 ÷ 100 × $8.00 = $9,600 in additional premium. If actual payroll had been lower, the insured would get a return premium.

Audits surprise people in predictable ways. Payroll can be moved to a costlier class code. Subcontractors without certificates of insurance are often added to your payroll. Overtime is usually charged at straight time only if your records separate the premium portion. Keep payroll registers, tax filings and subcontractor certificates organized before the auditor calls. The guide on premium audits: how they work and how to prepare covers disputes, and the exposure base entry explains what is being counted.

Last reviewed October 10, 2026

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Related terms

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. Earned premium The share of a policy's premium that matches the coverage period already elapsed, which an insurer can book as revenue and keep if the policy ends early. Class code The numeric code that classifies a business's operations for rating, setting the workers' compensation rate per $100 of payroll. Minimum earned premium A policy provision letting the insurer keep a stated percentage of the full premium if the policy is cancelled early, however little of the term has elapsed. Experience modification rate (EMR) A multiplier on workers' compensation premium comparing an employer's actual claim losses with the losses expected for its industry and size.

Related guides

How to budget for business insurance Build an insurance budget from premium, deductibles, audits, taxes and fees, then test it against cash flow and total cost of risk, with a worked hypothetical. Commercial insurance fraud: premium fraud and staged claims How premium fraud and claim fraud work in commercial insurance, what they cost a business that commits or suffers them, and how to avoid fake policies. Embedded insurance for businesses: how it works and what to check Embedded insurance is sold inside payroll, accounting and POS software. Who is licensed, who issues the policy, and what to verify before you accept. The experience modification rate (EMR) explained How the NCCI experience mod is calculated from payroll and losses, which policy years count, why frequency outweighs severity, and how to check your worksheet. How commercial insurance premiums are calculated Premium is an exposure base times a rate, adjusted for limits, deductible, experience and schedule rating, plus flat charges. A worked example shows the math. How workers' comp premiums are calculated Payroll, class code rates, the experience mod, schedule credits, premium discount and the audit explained step by step, with a hypothetical worked example.

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Amerisure Michigan mutual founded in 1912 that insures mid-sized construction, manufacturing and healthcare firms nationwide through select independent agencies. biBERK Berkshire Hathaway's direct-to-business insurer: comp, BOP, GL, E&O, commercial auto and umbrella quoted and bought online or by phone, no agent needed. EMPLOYERS Reno-based workers' comp specialist for lower-hazard small businesses, sold through agents and online through its Cerity brand; rated A (Excellent) by AM Best. Huckleberry Online insurance agency owned by Paychex since 2023. Quotes workers' comp, BOP and GL from carriers such as AmTrust, Chubb and The Hartford. New York State Insurance Fund (NYSIF) New York's state agency fund for workers' comp, disability and paid family leave. It competes with private carriers and must take any employer that applies. Pie Insurance Venture-backed insurtech that writes small business workers' comp on its own A- rated paper in 39 states and D.C., sold online and through 5,000-plus agencies.

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Related tools

Workers' comp premium calculator Build a workers' comp premium step by step from payroll, class code rates, your experience mod, credits, discounts, fees and assessments.

Related en español

Auditorías de primas: cómo funcionan y cómo prepararse Cómo las auditorías de compensación al trabajador y responsabilidad civil fijan la prima final, qué cuenta el auditor y cómo evitar o disputar un cobro. Contratistas independientes y compensación laboral: el riesgo de clasificarlos mal Cómo trata la compensación laboral a los contratistas independientes, por qué un 1099 no basta y dónde están las pruebas del DOL, IRS y ABC a octubre de 2026. Cómo se calcula la prima de compensación laboral Nómina, tasas por código de clase, factor de experiencia, créditos, descuento de prima y auditoría, paso a paso y con un ejemplo hipotético resuelto. Compensación laboral para pequeños negocios Cuándo un negocio pequeño debe tener compensación laboral, cómo cuentan dueños, familiares y subcontratistas, cómo se tarifica y cómo controlar el costo. Seguro de compensación laboral: cómo funciona Qué paga, quién debe tenerla, cómo se calcula la prima con nómina, códigos de clase y factor de experiencia, y qué hacen las tres partes de la póliza.