An audit of one or more of your business insurance policies is one situation that requires your early and immediate attention.
The scenario with every insurance provider is different. The scenario will be something like this: Your insurance carrier will contact you. They want to conduct a premium audit. You’ve already paid your premiums for the year. Most policies are based on the best estimate of information you can provide at the time your policy is issued or renewed, but that information could change over the course of the policy year. You may end up not paying enough or paying too much for your insurance based on your actual payroll or gross sales or change in business operations.
This is where a premium audit process comes in. Your insurance company will conduct a premium audit after your policy term expires, review your actual business operations, and calculate your final premium. Depending on the size of your operation, an auditor may be able to gather the information they need over the phone, electronically, you may be asked to fill out and return a simple form online or through the mail. For some or larger operations, an auditor may prefer to visit your office and review your records with you. This may take an hour or two of your time depending on the type of business and whether or not there have been changes in your business operations.
The auditor will let you know prior to your appointment exactly what information they will need to review. Having all the requested information ready prior to the meeting will shorten the process. They may ask to review accounting records including payroll, journals, disbursements, invoice reports, sales reports, vendor reports, general ledgers, social security reports, state unemployment forms, or other tax reports. You may also be asked for information about the business entity, ownership, corporate structure, and the business operation. It’s also important to understand any excluded persons from a policy prior to the audit.
Since an audit can encompass such a vast array of data, here are some tips for preparing:
- First decide which staff member is best able to work with the auditor. We do not always recommend referring the auditor to a bookkeeper or CPA. No one cares about your business like you do. This should be someone familiar with the work done by all departments and employees and is knowledgeable about the records needed to complete the audit.
- Review the appointment letter and prior year’s audit billing statements to familiarize yourself with the data the auditor will be reviewing.
- Gather all pertinent accounting records.
- Review payroll documents to make sure that they include breakdowns of wages by employee, department, and class code. Breakdowns should also include overtime pay and tips if applicable.
- Verify that you have certificates of insurance on file for any subcontractors you may have used. Be sure that the documents show that the subcontractors have their own current workers’ compensation and general liability insurance.
- Lastly, ask questions during the audit to clarify anything you do not understand.
Maintaining detailed payroll and sales records for the policy period is the best way to ensure that the audit process goes smoothly. If those records are organized, the audit can be completed with minimal effort. Don’t let a premium audit be a complicated process.
Our goal as your independent insurance agency of choice is to bring awareness and guidance to most situations that may occur with your insurance program. If you have questions regarding the premium audit process and need our assistance before, during or after the audit process, please us know.
Here’s 3 easy ways to reach us:
- Call 951-600-5751
- Text 951-482-8144
- Email firstname.lastname@example.org
We appreciate this and every opportunity to serve and protect you!
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