Many commercial policies begin using estimated exposure.
For example, when a Workers’ Compensation policy starts, the business may estimate:
$300,000 annual payroll
But at the end of the year, actual payroll may be:
$450,000
The premium was originally calculated using the estimated $300,000.
The insurance company may therefore calculate additional premium based on the extra $150,000 of actual payroll.
The opposite can also happen.
If the business estimated $450,000 but only generated $300,000 of applicable payroll, the audit may produce a credit, subject to minimum premiums and policy terms.