Premium Audit FAQ

Q:  What is an Audit?

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

Q: Why and when is it necessary?
A: 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.

Q: What insurance coverages require an audit?
A: The following insurance coverages require an audit:

  • Workers’ Compensation
  • General Liability
    – Premises/Operations Liability
    – Products Completed Operations
    – Independent Contractors
  • BOP
Q: How should your records be kept?
A: 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 $1,000,000 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. 

Q: Who conducts the audit?

If the conditions of your policy require an in-person or virtual audit, a Premium Auditor will contact you to either schedule an appointment or to obtain the information and documents needed to complete the audit virtually. The Premium Auditor will examine and audit all records relating to your policy. 

Another type of audit that Harford Mutual Insurance Group uses is a mail audit, which the insured executes. A letter is mailed directly to the insured via the postal service informing them that they must complete an audit and provides instructions on how to log into our internal auditing system, powered by AuSuM, to complete the audit. Harford Mutual Insurance Group will review mail audits once they are submitted, and the insured will be made aware of any additional information needed. 

Mail audits can be completed using the following link: