When an audit is a good thing
If you’re like many businesses, you are receiving your premium audit paperwork in the mail this month. And, like many others, you may be wondering why insurance companies need information like:
- legal business entity
- gross sales last year
- description of business operations
- itemize list of all employees (name, description of work performed, gross wages paid and number of weeks worked)
- subcontractors used (and certificate of insurance)
The company already insures you, right? Don’t they already have this information?
While that might be true, often times a business can change over a period of a year. A company might incorporate, add a new product line or start offering a new service.
They also could have downsized, eliminated a service that they use to provide or have fewer employees. There are many things that can happen during the course of a year and it is important to make sure that the insurance company has the right information to properly calculate their premiums.
An audit can be mutually beneficial for a business owner as well as it can uncover discrepancies that might have been previously reported and help you lower your insurance costs. The key is to be prepared for your audit.
Make sure you have accurate job descriptions for your employees
Have your gross sales for the prior policy period calculated
- Have your payroll calculated and separated by class code
Last but not least, the most important step is to review the final audit when the insurance company has completed it.
I often see these final audits stuffed in a folder or binder - unopened.
Audits contain key information that can affect how much you pay for your insurance. Take the time to review it, confirm that the reported figures are correct and that the class codes match your job descriptions. A little time might save you a lot of money.