Premium

Your premium is the price of your insurance. You pay it to the carrierInsurance carrierAn insurance carrier is the company that issues your policy, takes on the financial risk it describes and pays covered claims.Read the definition in exchange for the coverage the policy describes, whether or not you ever make a claim.

What affects your premium

UnderwritingUnderwritingUnderwriting is how an insurance company evaluates your business’s risk to decide whether to offer coverage, on what terms and at what premium.Read the definition sets the premium based on how likely and how costly claims are for a business like yours. Common factors include:

• what your business does, often expressed as a class codeClass codeA class code is a number insurers use to classify what your business does, so your rates reflect the typical risks of businesses doing similar work.Read the definition
• where you operate
• your revenue or payroll, depending on the policy
• the limits and deductibleDeductibleA deductible is the amount you pay toward a covered loss before your insurance pays, usually subtracted from the claim payment.Read the definition you choose
• your claims history
• for property, the value of what you’re insuring and how it’s protected

Two quotes for the same business can differ because insurers weigh these factors differently. To see your own number, start a quote.

Estimated vs. final premium

Some premiums are fixed for the policy periodPolicy periodThe policy period is the span of time between a policy’s start and end dates, usually 12 months, during which its coverage is in force.Read the definition. Others, especially workers’ comp and many general liability policies, are based on estimated payroll or sales. After the policy ends, a premium auditPremium auditA premium audit is the insurer’s review of your actual payroll, sales or other figures after a policy ends, used to replace estimates and set your final premium.Read the definition compares the estimate with your actual figures, and you may owe more or get money back.

If a policy is canceled partway through, the part of the premium for time already covered is “earned,” and the rest is “unearned.” You may get some of the unearned premium back, though some policies keep a minimum premium or apply a cancellation charge.

An example