What is the primary basis for calculating a premium for employers' liability insurance?

The primary basis for calculating a premium for employers' liability insurance is payroll. This is because the level of risk associated with insuring employees often correlates closely with the total payroll amount. A higher payroll suggests a larger workforce, which typically indicates a greater exposure to workplace accidents or injuries.

Insurance providers assess the payroll to estimate potential liabilities. As payroll increases, so does the potential risk, leading to an adjustment in premium rates. This approach ensures that the premium is proportionate to the level of risk the insurer is taking on.

While the number of employees, type of work performed, and previous claims history are significant factors that can influence premiums, payroll serves as the foundational measure reflecting the financial scope of the employer’s liability exposure. Thus, it provides a more comprehensive assessment of risk for purposes of determining the correct premium level.