Premium Audit FAQ

A report of collected information of an insured’s operation and accounting records used to determine the actual insurance exposures for the coverages provided.

The original premium on the policy is an estimated premium. The final audit determines the actual premium. When actual exposures differ from the estimated exposures, an adjustment must be made to the premium of the expired policy.

The following insurance coverages require an audit:

  • Workers’ Compensation
  • General Liability
    • Premises/Operations Liability
    • Products Completed Operations
    • Independent Contractors
  • BOP

Proper record-keeping will permit the auditor to apply any allowable credits to your final premium. When the auditor requests payroll information, this includes remuneration. Remuneration means money or any substitute for money, and includes the following:

Overtime Pay
Holiday Pay

Vacation Pay
Sick Pay
Payment of Piece Work
Profit Sharing Plans

Statutory Payment
Tool Allowances
Value of Board, Lodging
Store Certificates
Other $ Substitutes

In most states, the amount paid in excess of straight time pay can be deducted if the excess can be verified in your records. You must maintain your records to show overtime pay separately by employee and in summary by classification of work.

All subcontractors that you use must provide current Certificates of Insurance proving they have Workers’ Compensation insurance for the time that work is performed. If the certificates of insurance are not available for review, the subcontractor amounts must be treated as payroll and appropriate premium charges will be made.

For General Liability, it is necessary for contractors to secure a Certificate of Insurance from each subcontractor they hire. Without a Certificate showing limits of liability of$1 Million or more, it will be necessary to classify these subcontractors as employees.

For Workers’ Compensation, if the subcontractor is an officer, partner or sole proprietor with no employees and exempt from Workers Compensation coverage, a certificate of insurance showing General Liability insurance with limits of liability of $1,000,000 or more is required.  Without certificates of insurance, it will be necessary to classify these subcontractors as employees.  Additional documentation may be necessary depending on state requirements.

We cannot accept Amish Liability, or like coverage, as a valid proof of insurance.

Division of Payroll 
Generally, a division of an individual employee’s payroll to more than one classification is not allowed, except for construction or erection workers. In these cases, the payroll may be allocated to each type of work performed if proper records are kept and allowed by the state and rating bureau. Your records must show the number of hours and amount of payroll for each type of work. Without an adequate breakdown, the full payroll must be charged to the highest-rated classification.

If the conditions of your policy require a physical or virtual audit, a Premium Auditor will contact you for an appointment or to obtain the information and documents needed to complete the audit virtually. The Premium Auditor will examine and audit all records that relate to your policy.  Mail Audits or Voluntary Audits are the 3rd type of audit that may be conducted.  A letter will generate informing the policy holder that their policy will be audited and give instructions on how to sign onto our internal auditing system and complete the audit themselves.  Once mail audits are submitted, they will be reviewed by our internal auditing reviewer and the policyholder will be made aware of any additional information needed.  Mail audits can be completed using the following link: Premium Audit