How General Liability Insurance Is Priced in Florida: Revenue vs. Payroll Rating

Unlike a homeowners policy with a fixed annual premium, a commercial general liability (GL) policy for a Florida contractor is an auditable policy. That means the premium you pay at the start of the year is an estimate — and at the end of the year, your carrier audits your actual business activity to determine what you truly owed. If your business grew, you get a bill. If it shrank, you may get a refund.

The variable that drives your GL premium is called the rating basis, and for contractors it is almost always one of two things: gross revenue (also called gross receipts or gross sales) or payroll. Understanding which one your policy uses — and why — is the single most important thing you can do to avoid a surprise audit bill.

The most common rating basis for Florida contractors is gross revenue. Under a revenue-rated policy, your GL premium is calculated by multiplying your total annual gross receipts by a rate per $1,000 of revenue. For example, if your rate is $8.50 per $1,000 and your gross revenue is $500,000, your annual premium is approximately $4,250.

Revenue-based pricing is used because it captures the full scope of a contractor's exposure — including materials, subcontractor labor, and markup — in a single number. A general contractor who subs out 80% of the work still generates revenue from those projects, and the GL policy needs to reflect that exposure even if the GC's own payroll is small.

The audit process for a revenue-rated policy is straightforward: at year end, the auditor will ask for your profit and loss statement, tax return, or bank statements to verify your actual gross receipts. If you billed $700,000 instead of the $500,000 you estimated, the carrier will charge additional premium on the $200,000 difference. This is the most common source of surprise GL audit bills for Florida contractors.

Trade	Typical Rating Basis	Approximate Rate Range (per $1,000)
General Contractors	Gross Revenue	$6 – $14
Roofing Contractors	Gross Revenue	$18 – $35
Concrete / Masonry	Gross Revenue	$8 – $16
Painting Contractors	Gross Revenue	$7 – $13
Landscaping	Gross Revenue	$4 – $9

Rates are approximate advisory ranges for Florida and vary significantly by carrier, claims history, and coverage limits.

Some trades and some carriers price GL on payroll rather than revenue. Under a payroll-rated policy, your premium is calculated by multiplying your total annual payroll by a rate per $100 of payroll — the same structure used for workers' compensation. For example, if your rate is $3.20 per $100 and your payroll is $250,000, your annual premium is $8,000.

Payroll-based GL rating is more common for trades where the contractor's own labor is the primary risk driver and subcontracting is minimal. Electrical contractors, HVAC contractors, and plumbing contractors are frequently rated on payroll, because the exposure is closely tied to the number of hours their own employees work on job sites rather than the total value of the project.

The audit process for a payroll-rated policy mirrors a workers' comp audit: the auditor will request payroll records, 941 tax forms, or a payroll service report. If you hired additional employees mid-year, the audit will capture that growth. One important nuance: subcontractor costs are often excluded from payroll-rated GL, but only if the subcontractor can provide a valid certificate of insurance. Without a COI, the carrier may add the subcontractor's estimated payroll to your audit at your full GL rate.

Trade	Typical Rating Basis	Approximate Rate Range (per $100 payroll)
Electrical Contractors	Payroll	$2.50 – $5.50
HVAC Contractors	Payroll	$2.00 – $4.50
Plumbing Contractors	Payroll	$2.50 – $5.00
Framing Contractors	Payroll	$3.50 – $7.00
Janitorial / Cleaning	Payroll	$1.50 – $3.50

Rates are approximate advisory ranges for Florida and vary significantly by carrier, claims history, and coverage limits.

There is no universally "better" rating basis — it depends on your business model. The key question is: which number grows faster when your business is busy?

If you are a general contractor or roofer who regularly marks up materials and subcontractor costs, your revenue will grow much faster than your payroll when business is good. In that case, a payroll-rated policy — if you can find one — would likely produce a lower premium during a busy year. Conversely, if your revenue is relatively stable but you hire heavily during peak season, a revenue-rated policy may be more predictable.

The practical reality is that most carriers assign the rating basis based on the trade classification, and you have limited ability to choose. However, there are two situations where the rating basis is negotiable or variable:

• Admitted vs. surplus lines carriers: Surplus lines carriers (non-admitted) have more flexibility in how they rate policies. A surplus lines broker may be able to find a payroll-rated GL for a trade that standard carriers rate on revenue.
• Package policies (BOP): A Business Owner's Policy that bundles GL with property coverage may use a different rating structure than a standalone GL policy. For small contractors, a BOP can sometimes produce a lower effective GL rate.

Regardless of whether your GL is rated on revenue or payroll, the same audit pitfalls apply. Understanding them in advance is the best way to avoid an unexpected bill at year end.

1. Underestimating the deposit premium. When you bind a GL policy, the carrier asks you to estimate your annual revenue or payroll. Many contractors underestimate to keep the upfront cost low — then face a large audit bill when actual numbers come in higher. A better strategy is to estimate conservatively high at binding, which may result in a small refund at audit rather than a bill.

2. Failing to collect subcontractor COIs. On a revenue-rated policy, subcontractor costs are typically included in your gross revenue. On a payroll-rated policy, subcontractor labor is excluded — but only if you have a valid certificate of insurance on file. Without a COI, the carrier adds the sub's estimated payroll to your audit. Collecting COIs before work begins is non-negotiable.

3. Misunderstanding what counts as "gross revenue." Most GL policies define gross revenue broadly to include all amounts billed to customers — materials, labor, markup, and change orders. Some contractors mistakenly report only their labor revenue or net revenue after subcontractor costs. The policy language controls, and most standard ISO forms use a broad definition. Review your policy's audit provisions carefully or ask your agent.

4. Not reporting mid-year changes. If your business grows significantly mid-year — you land a large contract, hire a crew, or expand into a new trade — notify your agent. Most carriers allow you to increase the deposit premium mid-term to avoid a large audit bill at year end. This also prevents the carrier from viewing a large discrepancy as a red flag.

The rating basis for your GL policy is disclosed in the declarations page and the premium audit section of your policy. Look for a line that says something like:

"Premium basis: Gross Sales / Gross Receipts — estimated $500,000"

or

"Premium basis: Payroll — estimated $250,000"

The rate per $1,000 (for revenue) or per $100 (for payroll) will appear alongside the estimated basis. Multiplying these two numbers gives you the estimated annual premium before any credits or surcharges.

If you are not sure which basis your policy uses, call your agent and ask specifically: "Is my GL rated on gross revenue or payroll, and what is my current estimated basis?" This is a basic question that any agent should be able to answer immediately. If they cannot, that is a signal to shop your coverage.

If you receive a GL audit bill that seems incorrect, you have the right to dispute it. The most common grounds for disputing a GL audit are: (1) the auditor included revenue from excluded operations (such as work performed by properly insured subcontractors), (2) the auditor used the wrong classification code, or (3) the revenue or payroll figures used do not match your actual records.

To dispute a GL audit, contact your carrier's audit department in writing within 30 days of receiving the audit statement. Provide supporting documentation — your tax return, P&L statement, or payroll records — and a written explanation of the discrepancy. Most carriers have a formal audit dispute process, and many errors are resolved at this stage without escalation.

For complex disputes — particularly those involving subcontractor classification or large dollar amounts — consider working with a specialist. The Audit Monkey offers a $99/month service that reviews GL and workers' comp audits for Florida contractors, identifies errors, and handles the dispute process on your behalf.