A premium audit is a systematic investigation of records, documents, systems, and operations.A Premium Audit is a methodical examination of an insured's operations, records, and books of account to determine the actual insurance exposure for the coverage provided and concluding with a precise report of the findings.
Why have a Premium Audit? Why am I being audited?
Workers compensation, general liability and other policies are based on information that may change during the year. Two of the most common are payroll and sales. At the beginning of a policy term an estimate is made for the upcoming policy period. Due to many variables, payroll and sales will vary during the year. This may cause an insured to overpay or underpay. A Premium Audit will precisely calculate the information that is used to determine the premium for the policy.
Other common reasons for a premium audit include but are not limited to:
- Meeting regulatory requirements
- Collecting rate-making data
- Inhibiting fraud
- Reinforcing insured's confidence
What information will I need to prepare for a premium audit?
It is always best to discuss with the auditor ahead of time what information is needed for your specific Premium Audit.
Some common items that may be needed include the following:
- Payroll Records
- Tax Returns
- General Ledger
- Income Statement
- Certificates of Insurance for subcontractors
- Check Book
- Cash Disbursements
- General Journal
What should I expect at my Premium Audit?
A Premium Auditor will review your books to pull information needed for the audit. The auditor will also ask questions having to do with the business including job descriptions of each employee. A tour is conducted to verify operations of the business.