In general, an ideal premium base should be an accurate measure of the loss exposure. It should result in a higher premium as the loss exposure increases and a lower premium as the loss exposure decreases. An ideal premium base would also be simple to determine and difficult to manipulate. A simple premium base reduces expenses for the insured and the insurance company.

In contrast to Workers’ Compensation coverage where payroll is the only exposure base, General Liability coverage has several bases of premium.

PAYROLL
Payroll is defined as the total remuneration paid or payable by the insured for the services of employees. Remuneration means money or substitutes for money. This premium base is most commonly used by insureds in the construction business. The rates apply per $1,000 of payroll.

• Holiday Pay
• Vacation Pay
• Sick Pay
• Commissions
• Bonuses
• Piecework
• Rental Value - the rental value of an apartment or house provided for an employee
• IRS Section 401K Plan - all deferred salary is part of payroll
• IRS Section 125 Plans - when an employee uses a part of his/her salary to buy group insurance, the wages prior to the deduction are included as payroll
• Overtime Pay - except for premium overtime as described in "Is There Payroll That Can Be Excluded."
• Leased Workers and Temporary Labor
• Hand Tool Allowance
• Total Cost Paid to Uninsured Sub-contractors - is included. See "Total Cost" for sub- contractors that are insured
  

• Premium Overtime - the increase in pay above the normal hourly rate
• Payroll of Drivers and Their Helpers
• Severance Pay - however, all earned holiday, sick, and vacation pay is still included.
• Executive Officers’, Partners’, or Sole Proprietors’ Payroll engaged only in clerical operations, sales, or driving duties
• Payroll of Salespersons, Collectors, or Messengers, Clerical Office Employees, and Drafting Employees
• The Value of Special Reward for Individual Invention or Discovery Expense Allowances - can be excluded if they are qualified business expenses
• Wages While on Active Military Duty
• Certain IRS Inclusions - there are some types of benefits that are included for tax purposes but excluded for Workers’ Compensation purposes. These are the personal use of a company car, relocation expenses, third-party sick pay, the value of group life insurance over $50,000, tuition reimbursement, club memberships, and aircraft travel.

TOTAL COST
Total cost is defined as the total of all construction or logging work subcontracted in connection with each specific project. It includes:

The cost of all labor, materials, and equipment furnished, used, or delivered for use in the execution of the work

All fees, bonuses, or commissions made, paid, or due. The rates apply per $1,000 of Total Cost.

GROSS SALES
Gross sales is defined as the gross amount charged by the named insured, concessionaires of the named insured, or by others trading under the insured’s name. This base is most commonly used by insureds involved in manufacturing and mercantile operations. The rates apply per $1,000 of Gross Sales.

• Intercompany Sales and Foreign Sales, unless specifically excluded by the policy
• Operations performed during the policy period
• Rentals
• Dues or Fees
• Foreign Exchange Discounts
• Freight Allowance to Customers
• Total Sales of Consigned Goods or Warehouse Receipts
• A "Wholesale Value" for those who manufacture a product and sell it to consumers
• Trade or Cash Discounts
• Repossession of Items Sold on Installments (amount actually collected)
• Bad Debts

• Interest Income
• Initiation Fees
• Sales or Excise Taxes which are Collected and Submitted to a Governmental Division
• Credits for Repossessed Merchandise and Products Returned. Allowances for Damaged and Spoiled Goods
• Finance Charges for Items Sold on Installments
• Freight Charges on Sales if Freight is Charged as a Separate Item on Customer’s Invoice
• Royalty Income from Patent Rights or Copyrights Which are Not Product Sales

ADMISSIONS
Admissions are defined as the total number of persons, other than employees of the insured, admitted to the events insured or to events conducted on the premises whether on paid admissions, tickets, complimentary tickets, or passes. An example would be a theater for movies or live performances. The rates apply per 1,000 admissions.

GALLONS
Gallons are defined as the total volume of gallons distributed or sold. This is commonly used for fuel dealers or distributors. The rates apply per 1,000 gallons.

EACH
This basis of premium involves units of exposure. An example would be "per person," an airport would use "per control tower," an athletic event would use "per game."

AREA
The total number of square feet of floor space is the most common charge for property owners. The rates apply per 1,000 sq. ft. of area.

1. The area is the total of each floor added together, including basements, but not the area of the following:

– courts and mezzanine type of floor openings

– portions of basements or floors where 50% or more of the area is used for shop or for building maintenance by building maintenance employees, heating units, power plants or air-conditioning equipment.

2. For tenants, determine the area they occupy in the same manner as for the entire building.

I Have Other Questions. Where Do I Call?
MassOne Insurance at (413) 773-9913

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