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Estimated Annual Premium or Deposit Premium

A Workers Compensation Term Defined, Described and Explained

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Estimated Annual Premium or Deposit Premium

The amount of workers compensation premium an employer pays at the beginning of the workers compensation policy period. It is determined by multiplying estimated payrolls by the rates for each specific classification by the experience rating factor. At the end of the policy period additional or return premiums are calculated using the actual or final payrolls for the policy period. This is also often referred to as the deposit premium.

A workers compensation policy is what's known as an audited policy. This simply means that the estimated annual premium, or the premium you pay, as determined at the begining of the policy, is only an estimate of what the final premium may be. Workers compensation premium is determined by these two key factors along with additional rating factors as approved by the employers individual state:
  • The Rate per hundred of payroll. That is the individual rate an insurance company charges for the classification code that applies to a specific employer operations.
  • The rating payroll or remuneration as generated from the employers operations.
  • Other state approved specific rating factors.

The rate and payroll are applied to the employers premium calculation by multiplying the rate times the payroll divided by 100. Of course there are other rating factors which are also applied to come up with the estimated annual premium.

The estimated annual premium or deposit premium is then exactly that, an estimation of the premium based on what the employer projects their payroll at the end of the policy period to actually be.

The final premium for a workers compensation policy is determined after the end of the policy when the audit is complete.

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