General Liability Insurance policies rely on sales, payroll, or certain cost like subcontractors to determine premium. Also Workers Compensation policies rely on payroll of your employees and cost of subcontractors to do the same. These polices are subject to your insurance carrier to condut an audit after the policy expires.
When you first purchased a policy, the premium was estimated based on information provided about your business operations and exposures. Throughout the year your payroll will fluctuate. The premium audit is a standard insurance practice that makes sure the premium you have paid over the course of the policy term is based on your actual business exposures.
Review your actual payroll
Periodically compare your payroll records to the estimated payroll figures for the current term. If it appears that actual payroll will be higher than the estimated payroll, contact our office to make any necessary adjustments to avoid a large audit at the end of the policy term.
Use accurate job classifications
The type of work your employees do is directly related to the amount you pay for Workers’ Compensation insurance. As new employees are added or existing employees change roles within your company, be sure to use the correct classification.
Understand the impact of using subcontractors
Obtain certificates of insurance from all subcontractors for General Liability and Workers’ Compensation as documentation that they were insured during the time that the work was performed. Most companies require that subcontractors have General Liability insurance with limits of liability of $500,000 or higher.
In New Jersey (2000) and Pennsylvania (2011) – sole proprietors, partners and limited liability company members were given the option to elect or reject Workers’ Compensation coverage. The certificate of insurance should indicate whether coverage was elected or rejected.
Complete the premium audit on time
Completing the audit by the due date will help ensure the most efficient process possible and avoid premium estimates.
Want to know more about how to minimize audit suprises? Give us a shout below.
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