Premium audit
Also called Insurance audit or payroll audit
Definition
A premium audit is the insurer’s review of your actual payroll, sales or other figures after a policy ends, used to replace estimates and set your final premium.
Some policies are priced on numbers nobody knows yet, like what you’ll pay employees this year or how much you’ll sell. You pay a premium based on an estimate. After the policy period ends, a premium audit checks what actually happened and adjusts the bill.
How it works
Audits are most common on workers’ comp, which is usually priced on payroll, and on general liability, which may be priced on payroll, sales or what you pay subcontractors. The insurer, or an auditor working for it, may ask for:
- payroll reports and payroll tax filings
- a general ledger or profit and loss statement
- a breakdown of employees by the work they do, matched to class codes
- what you paid subcontractors, and their certificates of insurance
An audit can be a form you fill out, a phone or video review, or an in-person visit. If your actual figures came in higher than the estimate, you’ll owe additional premium. If they came in lower, you may get a refund, subject to any minimum premium.
The subcontractor surprise
For workers’ comp, money you paid an independent contractor who didn’t carry their own coverage can be counted as your payroll at audit, depending on your state and policy. That’s why contractors collect a current certificate from every sub before work starts, and keep it on file.