Insurance Premium Audit Tips & Tricks For Restoration Contractors (Part 1)

Premium audits can be a headache for restoration contractors. They can be time consuming, stressful, and, if you’re not careful, result in additional premiums that will be owed to the insurance company. Over the next 2 blog posts, we’re going to talk about what a premium audit is, how they are done, what records you need, how you can save money, and the most common questions surrounding premium audits.

What Is A Premium Audit?

Premium audits for restoration contractors are typically performed on commercial insurance policies providing workers compensation or general liability coverage.

When these policies are issued, you are asked to pay an estimated premium or “advance premium.” Advance premiums are based your estimated exposures. (For restoration contractors this is usually estimated payroll or revenue.)

Once your insurance policy expires, the insurance carrier will conduct an audit to determine the actual exposure and calculate the final earned premium. Premium adjustments are then determined by comparing audited exposures and operations with those you originally estimated.

What Records Do You Need for an Audit?

Records are important to the audit process. They provide and verify information, save time and minimize your insurance costs. The field auditor will let you know which of the following records will be needed for your audit when the audit appointment is made.

1. PAYROLL RECORDS – includes payroll journal and summary, federal tax reports (941’s), state unemployment reports and individual earnings records. Totals should be kept for overtime when applicable.

2. SALES JOURNAL – includes all goods or products sold, rented and/or distributed as well as service, repair and installation.

3. CASH DISBURSEMENTS – shows subcontractors, materials and casual labor.

4. CERTIFICATES OF INSURANCE – for subcontractors used during the policy period, showing General Liability insurance in all cases, and Workers Compensation Insurance coverage, if the subcontractor has employees.

In the next blog post, we will provide you with tips and tricks for saving money and answer your most common questions.