Premium audits are how insurance companies verify that the exposure of risk they are bearing is accurate for the amount of premium they are collecting. Usually, they do audits only on workers compensation policies. However, insurance carriers can and will do audits on liability as well as commercial auto policies.
How Premium Audits Work
A representative of the insurance company will contact you to set up an in-person meeting (phone audits are also common). The auditor will ask you to have all of your payroll records for the policy period ready. (If a policy is written on gross receipts, it will be sales records instead, though that’s not common for plumbing contractor policies.) The auditor will then record those numbers and submit them to the insurance company.
How A Premium Audit Can Benefit You
Going through a premium audit can be a beneficial thing, especially if you have had a down year and paid your premium based on an up year you may have had in the past. Or if you estimated your premium for a big project you were going to get that didn’t materialize. The auditor will adjust the premium to the actual exposure you had which may result in a refund if the original policy premium was more than the audited premium.
Your Payroll Records
The most important thing is to make sure that you keep accurate records of your wages, including overtime, vacations, double time, etc. That’s because if you pay wages but the employee did not work, there is really no exposure for the insurance company. So, the payroll for those periods will not be included in the final audit amount.
After the audit is completed, usually within 60 to 90 days after the policy period, you will receive a statement which will either be a debit where you will have to pay more or a credit that will be credited to your policy premium or paid out to you.
Insurance Program Crafted For Plumbing Contractors
USA Business Insurance can help you understand just what is behind a premium audit and how not to be surprised by owing a lot of money at the end of a policy period. Contact us today for plumbing contractor insurance especially designed for your business. It’s affordable, easy to understand and most importantly, reliable.
