Audits can be intimidating, but they don’t have to be. In fact, they’re actually an irreplaceable tool that insurance providers like us use to protect your construction site, business, and people as thoroughly as you need––and deserve. 

Still, if the idea of a construction insurance audit puts you on edge, you’re not alone. And you’re not stuck, either. Liz Harris, a Premium Audit Technical Manager at Builders Mutual, helps us understand how to prepare for yours, with confidence. 

Why construction site insurance audits matter

To know how to prepare, it’s important to gain understanding: Why, exactly, are these examinations necessary?

When it comes to construction insurance, audits aren’t a sign you’ve done something wrong; they’re simply a yearly state requirement. The state wants to verify initial premium calculations to ensure that any current coverage aligns with the true risks, demands, and operations of the construction company. 

In other words, there’s no need to freak out. It’s a common misconception that auditors are paid on commission based on premiums they secure when really, there are no incentives to bill customers extra. It’s not a means of punishment or the result of having a certain size claim. It’s just a routine check-in that happens at the end of your policy term to verify exposure and determine future rates. 

In reality, the requirement is a win-win. For insurance providers like us, audits provide confidence that we’ve selected the most appropriate premium and coverage levels. For construction companies, they provide assurance of a fair, suitable rate, rather than underpaying or overpaying for insurance. 

Taking steps to prepare for your yearly policy audit

To ensure the process doesn’t cause unnecessary stress or an upcharge, it’s important to keep the requirement in mind, all year long. In practice, this looks like:

  • Keeping audit documentation accurate and up-to-date

    • Your experience is likely to involve referencing and double-checking documentation. Keeping meticulous records of payroll, employee duties/tasks, special projects, project changes, subcontractor insurance coverage, and more will prepare you to answer questions and provide proof during the process.

  • Prioritizing organization

    • Having proper documentation is one thing––and knowing how to pull records in an expedited, dependable manner is entirely another. To ensure the process is timely and seamless, it’s worthwhile to make audit-specific organizational goals. Set yourself up for success by consistently tracking your projects and all related details, maintaining up-to-date records for all workers, and organizing documents such as certificates of insurance and quarterly reports.
    • After you’ve had one audit, you’ll have more clarity around what kind of documentation will be required of you from year to year. Choose a particular place (like a folder) to proactively put documents that are likely to be relevant next time, too.

  • Pre-scheduling check-ins

    • Construction sites get busy, often. It’s easy for preparations to get put on the back burner as immediate needs are added to the to-do list. Follow through with your good intentions by setting a calendar check-in once a quarter with designated time to get your COIs in order. Regular check-ins will give you the foresight to reach out to expiring COIs and help you avoid last-minute overwhelm.

  • Utilizing accounting software

    • While paper trails are important, accounting software offers the advantage of more valuable insights. Beyond bank statements, supplemental software can guide you in understanding the ups and downs of your business––letting you identify when you’re on trend or off. Having in-depth knowledge of your payroll and sales will empower you to know when you’re going to be significantly over your estimates (and thus owe a fee).

  • Communicating with your agent actively and openly

    • Think of your agent as a passionate advocate for your business––and your bottom line. Be transparent with them about significant payroll changes and let them work with you to assess the ebbs and flows in your work to ensure that your policy remains a good fit and you don’t end up with a surprise bill.

At Builders Mutual, we understand that things don’t always go according to plan. We are ready to work with you––and for you––to ensure your coverage is the best it can be. Online, you’ll find a wealth of resources at your disposal, including our Audit Preparation Kit. 

Get in touch with a Builders Mutual audit specialist today to get the support you need to take your next audit in stride.