Which statement is most accurate regarding premiums in a standard Workers' Compensation policy?

The most accurate statement regarding premiums in a standard Workers' Compensation policy is that the insurer has three years after the policy expiration to audit payroll records. This is significant because it allows insurers to determine the final premium based on actual payroll figures rather than estimates provided at the start of the policy. Many Workers' Compensation policies operate on a retrospective basis, meaning that the premium is initially calculated based on projected payroll. After the policy period ends, the insurer can review the actual payroll and make adjustments accordingly, ensuring that the employer pays a fair premium based on the risk exposure.

Understanding this aspect is critical for both employers and insurers, as it impacts the financial relationship and ensures that premiums are aligned with actual workforce activity and related risk. This process helps prevent issues of underpayment or overpayment of premiums.