An insurance premium audit can sound intimidating, but it’s a routine and necessary part of business. It’s how insurance companies ensure your policy’s premium is accurate based on your actual business operations. To make the process smooth and stress-free, we’ve created a helpful video guide with step-by-step instructions. Below the video, you’ll find a breakdown of what to expect and how to prepare.
What is a Premium Audit?
A premium audit is a review of your business’s financial records to verify the information you provided when you first purchased or renewed your policy. This is most common for policies like General Liability and Workers’ Compensation, where the premium is based on variables like payroll, sales, or other factors that can change throughout the year.
What to Expect During the Audit
The auditor will review your records to confirm that your policy’s classifications and payrolls were accurate. They may look at:
- Payroll ledgers, 941s, or state quarterly wage reports
- Overtime pay records
- Payments to subcontractors and certificates of insurance
- General ledgers and sales journals
- Job descriptions for employees
3 Steps to a Smooth Audit
- Organize Your Documents: Before the audit, gather all the necessary financial documents and have them organized and ready. This will save you and the auditor a significant amount of time.
- Review Your Classifications: Ensure your employees are correctly classified. An incorrect classification (e.g., a clerical worker listed as a construction worker) can drastically affect your premium.
- Track Subcontractors: If you use subcontractors, make sure you have a valid certificate of insurance for each one. Without it, their payroll may be added to yours, potentially increasing your premium.
The Final Word
A premium audit is an opportunity to ensure your business is neither overpaying nor underpaying for its insurance. By being prepared and having your records in order, you can make the audit a quick and painless process. For more information or to discuss your specific policy, don’t hesitate to contact us.