An insurance audit is a review conducted by your insurance company (or their auditor) to verify that your business’s operations, payroll, and other factors align with the information used to calculate your premium. The goal is to ensure you paid the correct amount for your coverage.
Why Insurance Audits Happen
- Many insurance policies—especially workers’ compensation, general liability, and commercial auto policies—base premiums on variable factors like:
- Payroll or labor costs
- Number of employees
- Sales revenue
- Job classifications
- Since these factors can change throughout the policy period, insurers use audits to adjust premiums up or down based on actual exposure.
Types of Audits
- Physical Audit – An auditor visits your business to review records such as payroll, contracts, and financial statements.
- Mail-In or Online Audit – You provide requested documents electronically or by mail; the insurer reviews the information remotely.
What to Expect
- The auditor will ask for documentation such as payroll records, tax filings, or invoices.
- After reviewing your records, the insurer may:
- Refund you if you overpaid
- Bill you if your exposure (e.g., payroll or employees) was higher than estimated
- Audits usually happen at the end of the policy period, but some may occur mid-term.
Tips to Make the Audit Smooth
- Keep accurate, organized records of payroll, contracts, and subcontractors.
- Respond promptly to audit requests.
- Clarify any unusual payroll situations or seasonal employees.
- Ask your insurance agent for guidance to avoid surprises.
Bottom line:
An insurance audit ensures your premium fairly reflects your actual business exposure. It’s not a penalty—it’s a standard process that protects both you and your insurer.