|Premium Audit: Audit Guidelines
A premium audit will be conducted on your Workers' Compensation or other commercial insurance policy. The primary function of the audit process is to determine the actual payroll, sales, subcontract cost, or other exposure used in calculating the final premium on your policy. Your premium will be adjusted as a result of the audit. If exposures have been underestimated, an additional billing will result. If exposures have been overestimated, a billing credit will result.
Types of Audits
At the beginning of your policy year, an on-site audit may be performed to review operations, classifications, and exposures. The auditor will review a representative base period in order to project exposures for the full policy term.
This audit is made at the end of your policy term to compare your policy premium to actual exposures. Since your policy was written with estimated exposures, this audit will determine actual exposures, and therefore, an actual, rather than estimated premium.
After your policy expires, you'll be contacted by phone or mail to make an appointment for the final on-site audit. If your records are located at an address other than your policy address, such as an outside accountant, please notify the auditor.
You may be asked to provide audit information by telephone if a physical audit isn't performed. An auditor will contact you to ask for the same types of information you would provide for an on-site audit. Exposures may be verified to tax reports such as 940, 941's or their other state equivalent.
If a physical or telephone audit isn't performed, you'll be asked to complete a voluntary (mail) audit. To assess the reasonableness of reported payroll, you'll be asked to submit copies of tax reports such as 940 forms.
Please cooperate with our auditors, including responding quickly to phone and mail inquiries. If you don't provide us with the requested information in a timely manner, your audit will be estimated and your policy may be cancelled by the carrier.
Premium Audit: Contracting Credit
Many states have a contracting credit available on your Workers' Compensation Policy for contractors with higher-than-average wage levels.
You will have completed an application to your state for this credit. If the credit was granted to you, we may ask to verify the payroll you reported to the state. We will ask for the records you used and workpapers you prepared when you applied for this credit. Your period used will be the third calendar quarter (July, August, September) of the year prior to your policy inception.