Gross Sales, Gross Receipts, and Gross Payroll Square Up with COVID-19

Read how COVID-19 may impact your business’ commercial general liability premium.

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Learn why commercial general liability insurance premiums may fluctuate due to COVID-19.

Gross sales. Gross receipts. Gross payroll. Three key indicators businesses consider when establishing operational goals and measuring operational success. Without sales and receipts, your business cannot make payroll. These three indicators are common rating factors used by commercial insurance companies, because they are one way to gauge liability exposure. COVID-19 disruption has effectively reduced liability exposure related to these indicators for many businesses. What short-term impact and potential turn-around effect might apply to general liability insurance premiums for your business?

The foundation of commercial liability insurance rating is exposure to risk. Main factors used in rating commercial liability risk exposure are class, size, and loss history of a business. Gross sales, gross receipts, and gross payroll each address the size issue, i.e. exposure to risk increases, as sales, receipts, or payroll increase. It follows that exposure to risk decreases, if sales, receipts, or payroll decrease. For purposes of illustration only, consider three hypothetical examples of commercial businesses and the possible effect COVID-19 may have on each one’s relevant rating factor, as well as what may potentially be the turn-around effect post-COVID-19.



EXAMPLE # Relevant
Rating Factor

COVID-19 Impact
Turn-Around Effect 




Gross Sales    
per thousand       
Supply chain interruptions,
production delays, staffing
shortages negatively impact
2020 gross sales, which
decrease from $1,000,000
to $800,000.
Supply chain strengthened
production on track,
necessary staffing shifts made.
Total recovery in gross sales
plus 10% growth to $1,100,000.

bar and grill

Gross Receipts 
per thousand        
Severe slowdown due to
mandatory closings and
take-out only business. 2020
gross receipts decrease 50%,
from $200,000. to $100,000.
Overwhelming support
and return of regular
Full recovery in gross
receipts, plus 15% growth.

Home remodeling
independent contractor

Gross Payroll   
per thousand       
Initial drop in jobs, followed
by resumption in steady work
adapted to the “new normal”.
Gross payroll temporarily
decreases 33% in 2020, from
$300,000. to $200,000.
Full recovery to steady
work. Gross payroll
returns to $100,000.


The above examples depict significant swings in the actual dollar amounts associated with the relevant commercial rating factors during COVID-19 and post-COVID-19. Assuming these fluctuations are real life, the practical impact for commercial general liability insureds would be a fluctuation in general liability insurance premium. If your business experienced a decrease in gross sales, gross receipts, or gross payroll (whichever is applicable), contact your independent insurance agent promptly to discuss an adjustment in premium. While several insurance companies routinely audit commercial insureds to determine what the actual gross sales, gross receipts, or gross payroll were, not all insurance companies do. It is worth a few minutes of your time to call your independent insurance agent to determine whether or not any return premium may be due to your business.

Bear in mind that a positive turn-around effect post-COVID-19, such as illustrated in each example above, would result in additional general liability premium due on audit. Commercial insureds should be prepared to pay any additional premium due, if the insurance company requires an audit.

Richey-Barrett Insurance is your Trusted Choice Independent Insurance Agent for commercial insurance. Call us today to discuss your commercial insurance concerns on audits and/or to review your current commercial insurance program.

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