Don’t ignore that dreaded Insurance Audit!
What happens each year, generates a lot of paperwork and steals time you could be using for business??? You don’t have to think twice. It’s the annual business insurance audit required by your insurance company.
For most of our business clients, completing audit forms may seem like a time-consuming nuisance, but it saves untold time and aggravation in the long run.
Why is an audit necessary?
It’s the only accurate way an insurance company can fairly determine your premium. When a business policy was issued to contractors and many other businesses, the liability portion of the premium was based on owners’ projections for the coming year – income. payroll and sales. For Worker’s Compensation policies, the premium was based on owners’ estimated payrolls. You provided this information to the best of your ability at the time.
At the end of the policy period, however, those projections must be measured against actual performance. Under your contract terms, the company has the right to adjust your premiums accordingly. If your projections or estimates were too high, you may be entitled to a premium refund. If they were too low, you may owe the company an additional premium.
How does the audit work?
Usually in one of two ways. You may be mailed a form that requests voluntary reporting of your actual figures and supporting documentation. Or, the insurance company may send an auditor to your place of business to go through the books, a more likely scenario for larger businesses. In either case, you are required under the terms of your contract with the company to comply with the audit request.
If you do not fulfill the request within a reasonable time (usually 30 days), the insurance company may estimate your prior year’s figures – almost certainly on the high side – and charge you an additional premium. Or the company may simply choose to cancel your coverage. In that case, Eldredge & Lumpkin would be unable to write another policy for you until you comply with the prior year’s audit request. Your business will be uninsured for as long as it takes to resolve the matter – sometimes weeks or even months. That could place your business in violation of state law if it involves your Worker’s Compensation coverage.
For more information on business insurance audits, contact your customer service representative at Eldredge & Lumpkin at 508-945-0393 or email firstname.lastname@example.org.