Why should I complete my insurance audit?

Your current insurance policy is about to expire, and you get a notification from the insurance company (or a third party) to complete an audit. WHY SHOULD YOU DO IT? Maybe you don’t need the insurance anymore or switched insurance companies. So, why?

When you signed up for your policy, the insurance company based your premium on estimated information. This could have been payroll, gross sales, the number of employees, or several other factors. By paying for and accepting the policy, you agreed to provide the insurance company with the exact financial information to rate it at the end of the policy period. 

Fast-forward to the end of the policy, and it is time for you and the insurance company to reconcile those numbers…This is the Audit. 

There are a few reasons why completing an insurance audit is important:

• Ensures you pay the right premium: During the audit, the insurance company verifies your business activity (payroll, sales, etc.) This ensures you are neither underpaying nor overpaying for your coverage. In some cases, you might even be due a refund.
• Maintains accurate coverage: The audit also helps identify gaps in your current coverage. This way, you can adjust your policy to ensure the proper protection for your business needs. 
• Avoids penalties: If you don't comply with the audit, your insurance company may impose penalties. These could include a significant increase in your premium or even the cancellation of your policy. Being non-compliant on your audit carries a 25% to 50% increase in the premium. If unpaid, you will be sent to collections. Even if you are no longer insured with that company. 

So What should you do?

• Find the communication from the carrier or third party. They could have contacted you by email, phone, or old-fashioned mail. Find the audit request information and read through it.

• Before you start, get your information ready. The audit request will include a list of the information you need to pull together to prepare for your audit. The items commonly needed vary by policy type. For Workers Comp, you will need your payroll reports, 941s, and Wage and Tax reports.  For General Liability, it might be the same info if your account is based on payroll, including sales, employee count, etc. Between the payroll reports and your Profit & Loss for your policy period. Remember to the list provided by the carrier.  

IF YOU USED SUB-CONTRACTORS, be sure to collect insurance certificates covering YOUR policy period. 

• Start the audit. Many are completed online. Set aside an hour or two and key the requested information into the online system or on the paper forms. 

We understand this feels like a nuisance and as busy as you are in running your business, this is the last thing you want to deal with. BUT completing an insurance audit ensures you have the right amount of coverage at the right price. It's a relatively straightforward process that can save you money and avoid headaches both now and down the road.