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Guaranteed Cost Premium

Guaranteed Cost Premium

Definition

Premium that is determined prospectively, locking in the cost for the policy period regardless of the loss experience. The only way the premium can generally change is upon audit of the underlying exposure. For example, a workers compensation guaranteed cost premium is developed from a rate applied per 100 dollars of estimated payroll. If the actual payroll during the policy term is more or less than the estimate, the premium is adjusted accordingly.

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