As your business policy term ends, you may receive a communication about a required process called a premium audit. You might think the word “audit” sounds like you made an error or that you missed a deadline. Actually the premium audit is a standard insurance practice that makes sure the premium you’ve paid over the course of the policy term is based on your actual business exposures.
When you first purchased your policy, your premium was estimated based on information provided about your business operations and exposures. But we all know that change is inevitable, and business are no exception. Throughout the year, payroll, sales, even your business operations, can fluctuate.
Premium Audit FAQs
If you’ve recently received an audit notice for your business policy, chances are you have a lot of questions. Here are some answers to the most frequently asked questions about premium audits:
Q. Why is an audit required?
A. The premium audit is required in order to ensure that the premium you’ve paid is based on your actual business exposures, which may have changed over the course of the policy term. The premium audit helps keep your coverage and premium accurately aligned, so you pay only for the coverage you need.
Q. Is the premium audit process a common practice?
A. The premium audit process is a standard insurance practice. In fact, most states require insurance carriers to perform a premium audit.
Q. My policy has been cancelled and I no longer have coverage from the insurance company requesting the audit, why am I receiving a notice to complete a premium audit? Do I still need to submit information?
A. Yes. The premium audit process is performed for the policy period and coverage for which you were insured. The information is still required even if your policy is no longer in force.
Q. Why isn’t the audit based on the calendar year?
A. A premium audit must be based on the actual inforce term of your policy. If your policy term is 3/1/2016 to 3/1/2017 the audit must match the term.
Q. What information is needed for my audit?
A. The most common information required during the premium audit process is payroll and/or sales records. Additional information and documentation may be required depending on the nature of your business and your audit.
Q. Can my accountant or other party complete the audit on my behalf?
A. Yes, you may forward the audit to your accountant or third party to have them complete it on your behalf. You will continue to receive reminders regarding your audit until the process has been completed.
Q. What will happen after my audit has been completed and reviewed?
A. The premium audit process could result in three different scenarios: a refund, additional premium due, or a determination that your initial estimate was reasonably close and therefore no change in premium is needed.
When you receive an audit, it’s important to make sure you complete it accurately and submit it on time. If you have any questions about an audit request you have receive, please don’t hesitate to contact us.
Source: The Hartford