What is a Premium Audit?
A routine part of Workers’ Compensation Policy
Because you rely on your insurance broker to be thorough, informed and detail-oriented, you can expect that terms and regulations on your policies will be adhered to – as stated and on time.
One of those features is the Premium Audit, which is an important part of your Workers’ Compensation Policy. Each time your policy expires, the audit is completed by your insurance carrier.
For much the same reason you carry workers’ comp – to protect you if an employee gets hurt in the workplace – the final audit is a form of protection as well. That closer look can confirm that your company is paying the appropriate totals for your insurance, which is set up based on estimates you provide at the time of application. The premium audit holds the policy up to actual numbers, including operations and payroll costs.
What to expect
The format for conducting a premium audit is up to your insurance carrier, who will make a determination according to the size and classification of your company. You can provide the necessary information through several platforms:
- In person
An auditor may come to your site to see operations firsthand, making it easier to create job classifications. The audit can be completed on site.
- By telephone
After you return a form to the insurance carrier, an auditor calls you for an interview to finalize the audit.
- By mail
You fill out a detailed form and send it to the insurance carrier.
What is my part?
First of all, you can speed up the process by getting the appropriate records organized in advance. An important part of the auditor’s responsibility is job classification, also confirming that the business itself is properly classified.
Those forms include:
- Forms 941 and 943 from your Quarterly Federal Tax Return
- Forms 1099, W2 and W3 from your Federal Taxes
- State Quarterly Unemployment Insurance Tax Reports
- Records from contractor(s)
- Payroll journals
- Overtime paid
- Clerical workers
When you purchase Workers’ Compensation insurance, you agree to the Premium Audit on the back end. Sometimes there are penalties for non-compliance, meaning a lack of participation in the audit. Or you could have your insurance policy canceled, which would remove the security you get from having a Workers’ Compensation policy in the first place.
To build on your success you need coverage for the unexpected, but you also want to be sure you’re paying the proper rate for the number of employees your company has on its team. And if the process sounds interminable – it actually takes just about 90 days, a pace that’s quickened by better organization on your part.