Business owners are usually required to complete audits on their commercial insurance policies annually, and this causes great confusion as to what they are for and why they are done. The Dearborn Agency is committed to providing insurance education to its community, therefore, we would like to provide some basic information on these audits.
Worker’s Compensation policies are always subject to audit by the insurance company. When the policy begins, an estimate of payrolls is provided to the insurance company and the policy premium is based on that payroll estimate. Once the policy renews for the next year, an audit of actual payrolls is conducted. If the actual payrolls are lower than the estimate, a refund is issued. If the payrolls are higher a bill is issued. It is as simple as that, but is it actually simple? No, it is confusing and time consuming. The Dearborn Agency would recommend having an agent and agency that assists with audits. Some agencies will assist, while many will not.
Liability policies are also audited in many instances and the audit is conducted the same way: an estimate is provided when the policy begins and the actual figures are checked once the policy year ends. Auditable liability policies can be based on sales, payrolls, admissions, etc, not only on payroll.
The service provided by insurance agencies greatly varies from one agency to another, but the premiums don’t necessarily vary, so when looking for an agent and agency, make sure you are getting as much service as possible for your premium dollars.
