If you maintain workers’ compensation and general liability insurance policies, an annual Premium Audit is part of the insurance process. Although the thought of completing a Premium Audit might seem daunting, with a little advanced planning, Premium Audits can be simple. We want to help you be prepared with the proper records and a thorough understanding of the process in order to make your Premium Audit as efficient as possible.

When Workers’ Compensation and General Liability policies are issued, the premium charge is estimated based on the historical records of your business’ operation. At the end of the policy term, an audit is conducted to determine your actual exposures during the policy period so we may adjust your premium accordingly. The Premium Audit also ensures that your current policy has the most accurate class codes and estimated premiums based on your operations.

Keith Perry and Steven Blinsink, premium audit field managers, join us as industry experts with a few tips to assist you along your audit journey.

Tip #1: Understand exactly what is to be audited.

Audit preparation should begin when your policy begins, and a large part of being prepared is knowing which records will be audited. These records include, but are not limited to, payroll, sales, employee counts, and inventory numbers. Before your Premium Audit occurs, Builders Mutual will provide a list of items required for your audit. Your insurance agent is also a good resource for this information, or you can download a copy of our Audit Preparation Kit.

Tip #2: Keep certificates of insurance and invoices.

When using subcontractors, always obtain certificates of insurance prior to subletting the work. Keep the certificates of insurance in a secure location for your information as well as for your Premium Audit. Maintain invoices showing materials and labor for each of these subcontractors. This can reduce your exposure and possibly save you money.

Tip #3: Separate payroll.

If your employees and/or subcontractors perform different types of labor, keep records showing the breakdown of those varying types of labor. This opens up the possibility for you to take advantage of different class codes to reduce your costs and more accurately classify your business.

Tip #4: Be inquisitive.

Throughout the life cycle of your policy, we encourage you to reach out to your auditor and agent with any questions or concerns. Builders Mutual builds lasting relationships with policyholders that transcend the audit.

Tip #5: Be present.

The day of your audit, owners, decision-makers, and persons “in the know” for company operations should be present and available to answer questions about both the business and individual duties. One of the most common reasons the processing of an audit is delayed or disputed is the lack of confirmed information. The more available you can be to answer questions, the more accurate and timely your audit will be.

Following these five tips can greatly increase the effectiveness of your audit and help reduce a little stress. Remember, your annual Premium Audit is an opportunity to learn more about the relationship between your insurance and your business as well as to create better business relationships with your agent and your auditor. Check out our frequently asked questions and stay tuned for more audit-related articles.