Frequently Asked Questions

What is a premium audit?

Which of my policies are subject to a premium audit?

Why is an insurance audit necessary?

What information do you need to correctly calculate my premium?

What additional information is required of contractors?

How do you obtain the information?

When will the audit occur?

What happens after I give you the information you requested?

Do I have to provide the information requested?

What happens after the auditor leaves?

What can I do to save money on my insurance premiums?

How are the owners classified in the audit?

Why is there still a premium charge when our subs provide their own insurance?

What is a premium audit?

A premium audit is our means of obtaining information to determine the actual payrolls, sales or other variable information that is used to calculate your insurance premium.

Commercial insurance policies providing Workers' Compensation, Garage Liability, General Liability and Contractors Businessowners coverage are generally subject to a premium audit.

When your policy was issued, your premium was based on your estimate of variable rating information, such as payroll or sales. An insurance audit is performed to determine what the actual premium should be based on your company's actual results.

Depending on the type of variable information used to rate your policy, we may request information that can be obtained from company accounting records such as payroll journals, sales journals, cash disbursement journals, general ledgers, social security reports and state unemployment tax returns, etc.

You may be required to provide certificates of insurance for your subcontractors. Without proof of insurance, they could be considered your employee, resulting in increased premium charges.

We attempt to obtain the information in a variety of ways:
1. Telephone
Our representative would contact your company by telephone and ask specific questions to obtain the necessary audit information.
2. Mail
A form would be sent to your company requesting the necessary audit information. You then complete the form in a timely fashion and return it to us for processing.
3. In Person
Our representative would visit your business (or your accountant) in person to review your records and obtain all necessary audit information.

Audits occur shortly after your new policy term begins and the prior policy term concludes.

We will input the information into our computer system and adjust premiums based on your actual business activity for the past year.

Yes, it's one of the terms of your insurance contract and is a standard insurance industry practice. Rest assured we observe the highest level of confidentiality in this process.

The results of the audit will be transmitted electronically by the auditor to the processing office. The processing office will then review the auditor's worksheets and prepare a Final Audit Statement. The Final Audit Statement will then be mailed to your insurance agent who will forward your copy to you.

If you maintain detailed records, the audit process will be much smoother and work to your advantage. Credits are available on the audit for pay types such as premium overtime, tips, severance pay, and third-party sick pay; however, your records must provide a summary of these wage types by employee, department, and class code to allow the credit.

If you're a contractor, your policy will allow a split of an employee's wages between different types of jobs. Your records should indicate what type of jobs each employee completed during your policy term. With this breakdown, we can allow the use of more than one class code. Without this breakdown, manual rules state we must include all wages in the highest-rated class that applies to any portion of your work.

Owners, officers, partners, and members can elect or non-elect coverage under your Workers' Compensation policy. The rules vary by state and your agent will be able to provide specific guidelines in your state. You cannot non-elect coverage under your Liability policy.

If you're covered under the policy, your wages will be included at either a fixed amount or actual amount (subject to a minimum and maximum), depending on your entity type and policy.

Owners will be classified according to their actual duties. You will be asked to provide a description of each officer's duties.

This is an issue that often comes up when auditing a contracting risk. Yes, it's true the sub may have provided proper certificates of Workers' Compensation and general liability insurance, but as far as the hiring contractor's liability, additional exposure is created by the presence of the subcontractor on the job. The standard general liability policy provides coverage for vicarious liability from the actions of others. It's true that any liability issues would probably be responded to by the subcontractor's general liability insurance carrier. However, an excess charge must still be made for the vicarious liability of the subcontractor by the hiring contractor's general liability carrier. This is a hard concept for contractors to accept but the exposure still exists. The rate on the hiring contractor's general liability will be much lower since they are providing excess coverage.