A deposit premium is the initial payment required when an insurance policy is bound, calculated based on your estimated exposures for the upcoming policy period. For workers compensation, the deposit is based on your estimated annual payroll multiplied by your class code rate and EMR. For general liability, it is based on estimated revenue or payroll depending on your rating basis. The deposit premium is essentially a down payment that the carrier collects upfront, with the final premium determined by audit at the end of the policy period.
Roofing contractors should understand that the deposit premium is not the total cost of their policy. If your actual payroll or revenue exceeds the estimates used to calculate the deposit, you will owe additional premium at audit. If your actuals come in lower, you may receive a refund, but only down to the minimum premium. This is why accurate estimation at policy inception matters: overestimating creates cash flow strain from overpayment, while underestimating creates a large audit bill at year-end.
Most carriers offer payment plans that spread the deposit premium over monthly or quarterly installments. For roofing businesses with seasonal cash flow, aligning your policy inception date with your busy season can help ensure you have revenue when premium payments are due. Some carriers also offer pay-as-you-go programs tied to your payroll provider, where workers comp premiums are calculated and collected each pay period based on actual payroll. These programs effectively eliminate the deposit and audit process, providing real-time premium accuracy that many roofing contractors prefer.