You may have received a call from your insurance company about setting up an appointment to audit your business operations. If you’ve been paying your premiums on time, you might be wondering why they want to do this.
A premium audit is a routine process that helps ensure your insurance premium matches the actual activities of your business during the policy term. When you first buy a commercial insurance policy, the premium is based on estimates. These estimates are often influenced by factors like payroll, sales, and the number of employees. The audit aims to replace these estimates with real figures, so your premium reflects what your business actually does.
These audits are important for several reasons. They ensure fairness by adjusting your premium to match your actual risk, helping you avoid overpaying or underpaying. They also help keep your business compliant with state regulations and reflect any changes in your operations, like hiring new staff or expanding services.
Typically, premium audits happen within 30 to 90 days after your policy ends. The format of the audit can vary based on your business size and complexity. Smaller businesses may only need to fill out a form online or through the mail, while larger businesses might require an in-person visit from an auditor. Regardless of the method, the auditor will inform you about the documents you need to have ready, which can help make the process smoother.
To prepare for your audit, you should gather specific documents. These may include your general ledger, records of cash disbursements, quarterly tax returns, payroll ledgers, and proof of insurance for subcontractors. Having these ready can save you time and make the audit go more smoothly.
After the audit, you will receive a summary of any changes to your policy or coverage. If your actual business activities were higher than estimated, you might owe more premium. Conversely, if your activities were lower, you could receive a refund or credit. The audit may also affect future premiums or terms of your policy.
To make the audit process easier, experts recommend keeping accurate records throughout the year, classifying employees correctly, communicating any significant changes in your business, and responding quickly to audit requests.
At Central Insurance, the goal is to make the audit process straightforward. They encourage business owners to maintain good communication with their independent agents and to keep their records organized. If you have questions about an upcoming audit or want to understand how it impacts your policy, reaching out to your insurance agent can provide clarity and support.