What does a deposit premium reflect and how is it handled?

What does a deposit premium reflect and how is it handled?

• A. Premium paid at policy end; insurer refunds overage.
• B. Premium paid at birth of policy; insurer does annual audit.
• C. Premium paid at start based on estimated extent of operations; insurer audits later.
• D. Premium paid in equal installments only.

Answer: (C)

A deposit premium is an initial payment made at the start of a policy based on an estimated level of operations or exposure. The insurer uses this estimate to determine a starting premium so coverage can begin without delay. Later, a premium audit reviews actual operations (like payroll, sales, or units) and adjusts the premium to the true amount. If the actual exposure is higher than estimated, you owe additional premium; if it’s lower, you may receive a refund or credit. This approach lets the policy start with a reasonable estimate and then settle to the final premium once full information is known.

A deposit premium is an initial payment made at the start of a policy based on an estimated level of operations or exposure. The insurer uses this estimate to determine a starting premium so coverage can begin without delay. Later, a premium audit reviews actual operations (like payroll, sales, or units) and adjusts the premium to the true amount. If the actual exposure is higher than estimated, you owe additional premium; if it’s lower, you may receive a refund or credit. This approach lets the policy start with a reasonable estimate and then settle to the final premium once full information is known.