Premium audits are typically performed on commercial insurance policies providing workers compensation, general liability and garage liability coverages. When these policies are issued, you are asked to pay an estimated premium or "advance premium." Advance premiums are based on the nature of your business and your estimate of exposures (i.e. payroll, sales, etc.) for the policy period.

Once your policy expires, we conduct an audit (collecting information on actual exposures and operations). From this information, we determine the final earned premium. Premium adjustments are then determined by comparing audited exposures and operations with those you originally estimated. By sharing the following information with you, we hope to accomplish a couple of things

The company will collect audit information from you shortly after your policy expires. Smaller, less complex policies may only require that you assemble and send the necessary data to us.
Larger and more complicated policies are handled by a field auditor who will schedule an appointment with you a few weeks after the policy expires. It is important for the auditor to ask questions about your operations. If you can not be present to answer questions, it is important for someone to be available that is familiar with the specifics of your entire business operations. A sample of a typical audit appointment card is shown on the back inside cover of this booklet. If you direct us to your accountant, we will obtain as much information as possible from your accountant and contact you if we have additional questions. Most of our audits only take 15 - 30 minutes. Audits of larger policies may take longer. Though the auditor will have a number of questions, you won't have to be directly involved during the entire audit if adequate records are available.

1. PAYROLL DIVISION - A single employee's payroll can only be divided when the employee works in construction, erection, or in trucking operations which are conducted as a separate enterprise. Proper records must be kept in dollar amounts that reflect work actually spent in the above mentioned classes before a breakdown can be applied. Without adequate records, the entire payroll for the employee must be placed in the highest rated classification.
   
   
2. EMPLOYEE TIPS - Tips declared by employees may be excluded from their gross payroll only if separately identified.
   
   
3. CERTIFICATES OF INSURANCE - Have certificates available for the audit (at your premises or your accountant's) to ensure that you aren’t billed for an extra premium unnecessarily. Certificates must cover the period when the subcontractor worked for you (this may require Certificates covering two different policy terms for the subcontractor in some cases). Also, the subcontractor must carry the same liability limits as your policy. For example - if you carry general liability limits of $ 1,000,000 per occurrence & $2,000,000 per aggregate your subcontractor will need those same amounts of liability coverage. If the subcontractor has employees, they must also carry the statutory limits for workers compensation coverage.
   
   
4. DRIVERS - (For general liability coverage), employees with the sole responsibility of driving may often be excluded from chargeable payroll if their wages are shown separately. However, employees who perform other duties besides driving must be placed in the highest rated class describing their duties.

A: To calculate the exact amount of premium that you must be charged. Actual exposures and operations are determined by an audit. After they are compared with initial estimates and later endorsements, an adjustment to premium is made via the Statement of Audit.

A: It is in your best interest to request a certificate from a subcontractor at the time the work is performed rather than at the time of audit. You will be charged for those subcontractors not providing General Liability certificates

A: If these employees are not in construction they will go into the highest rated class in which they work. Payrolls may be divided into appropriate construction classifications, provided the division is reflected in the original records in dollar amounts.