What is a Premium Audit?
An in-depth review of your business operations, including your payroll and/or sales information after the policy period of a specific insurance policy to determine the actual premium.
Many commercial insurance policies are based on estimated or future exposures (e.g. payroll, sales) provided by you or your agent prior to the start of your policy term. The final premium is calculated based on the actual payroll or sales for the year and the insurance carrier is required to examine your records to verify your premium is calculated accurately.
Why is the insurance company doing an audit?
It is standard industry practice and mandated by the state that a complete review of your exposure is performed to determine premiums were charged accurately.
Is the premium audit optional?
No. Certain business insurance policies and state insurance filings require annual premium audits for Workers Compensation, Automobile, General Liability and others.
What will happen if I don't complete my premium audit?
Non-compliance of your premium audit may result in additional charges, penalties and may cause policy cancelation. Audit non-compliance charges vary by state and by your insurance provider (check your workers compensation policy for details or contact your broker or Agent). Audit1 simplifies the process and provides a detailed check list to help guide you through the process.
Will my premium change as a result of the audit?
Yes. Prior to the start of your policy, you and/or your agent estimated your premium based on your expected exposure (payroll and/or sales). If the estimates were too high, you will receive a refund, if the estimates were too low, you will owe additional premium.
After the audit is conducted your premium may be adjusted based on your operations, employee classifications, use of sub-contractors and inclusion or exclusion of officers. Providing accurate data will ensure your premiums are computed properly.
When will I know the results of my premium audit?
Each insurance company has a different timeline which can vary from as little as 60 days to as long as 6 months
What can I do to avoid owing additional premium after an audit?
The better prepared you are, the more accurate your audit will be. Audit1 can help reduce the chances of unexpected premium by organizing the required payroll and related information.
There are several things you can do during the year to prepare the necessary information to reduce the chances of unexpected premiums due.
- Many carriers offer payment plans which allow you to pay based on your actual payroll each cycle which can eliminate discrepancies after an audit. (We can help set this up if necessary).
- Confirm your employees are listed and classified correctly and their job duties match the class code(s) on your policy.
- Accurately track your payroll and make sure your reports demonstrate overtime, tips and other items separately.
- Collect up to date certificates of insurance or approved exemptions from any subcontractors.
- Verify the owners/officers are included or excluded correctly and proper documentation is filed with the state(s).
- Notify your insurance agent and/or the company if your operations change or if you expect a significant increase in your exposure.
What is payroll?
The National Council on Compensation Insurance (NCCI) defines payroll as money or substitutes for money. Payroll may also be referred to as “remuneration.”
What exposure is used to calculate my Workers’ Compensation premium?
Workers compensation is based on gross payroll totaled by employee per pay period and summarized by class code. Each wage type may be either included or excluded dependent upon the state where the policy was written. To receive the proper credit, the wages must be separated by type.
Gross payroll may include all types of wages, including but not limited to:
- Tips
- Bonuses
- Commissions
- Overtime Pay
- Double Time
- Per Diem
- Incentive Plan
- Employee Discount Programs
- Holiday Pay
- Vacation Pay
- Jury Duty
- Bereavement
- Davis Bacon
- Cost of Living Adjustment
- Military Pay
- Sick Pay
- Payments for Piece Work
- Profit Sharing Plans (401k) Employee Contributions
- Section 125
- Statutory Payments
- Tool Allowance
- Meal Allowance
- Travel Time
- Uniform Reimbursement
- Housing or Lodging Allowance
- Store Credits, Discounts or Gift Certificates
- Substitutes for Money
What information is necessary to complete my audit?
The information required is dependent upon the type of coverage being provided. (Workers’ compensation is based on payroll, while General Liability is based on payroll, sales or revenue). In addition to payroll reports, there are a variety of additional reports and documentation which may be requested, including but not limited to:
- Payroll Registers or Summaries (broken out by wage type and employee)
- Complete description of your business, including hours of operations and radius of delivery
- Owner/Officer Inclusion/Exclusion forms.
- Federal Tax Returns (Needed if you do not file Federal or State wage reports)
- Sole Proprietor – Profit & Loss form 1040, schedules C pages 1 & 2
- Partnership – K-1 Distributions – US Partnership form 1065 pages 1 & 2
- Corporation – Form 1120 US Corporation Income Tax Return
- Not for Profit – Form 990 all pages
- Farm – Form 943 all pages
- IRS Form 941 (last four quarters)
- State Quarterly Wage Reports (last four quarters) FL – RT-6 (formerly UTC-6) Florida Department of Revenue Employers Quarterly Report of Wages, CA – DE9C Quarterly Contributions Return and Report of Wages, NJ – WR30 Employers Report of Wages, NY – NYS-45 Quarterly Combined Withholding Wage Reporting and Unemployment Insurance Return (See complete list in your forms library)
- Cancelled checks and bank statements
- General Ledgers
- Cash Disbursement journals
- Books of original entry (including source documents)
- Job contracts and/or invoices (material and labor should be separated or itemized)
- Certificates of Insurance for subcontractors (if applicable)
- Job descriptions detailing each employee’s duties
- Supporting documentation (such as work orders or time sheets) that substantiates any split between state and federal payroll if you have longshore exposure
- Written contracts
- Executive officer payrolls and descriptions of their duties (even if the officers have elected to be excluded from state workers’ compensation coverage)
- Brochures or promotional items that offer a comprehensive description of your business operations, including your products and/or services
It is to your advantage to keep detailed payroll records, while separating wages to ensure accurate payment of premium. Such as, overtime, the amount paid in excess of straight time pay can be deducted if the excess can be verified in your records.
Why are job duties or classifications required?
To help verify what your employees are doing and to make sure they are accurately assigned to a class code on your policy. Please indicate actual job duties, not job titles. Be as specific as possible and avoid general terms such as “does everything,” “runs the company,” “management,” “executive” or “clerical.” For clerical employees, please indicate their actual duties, for example, reception, accounting, bookkeeping, data entry, phones. For employees who travel for sales or client visits, please try to indicate an approximate percentage of travel or provide the number of trips per month.
What are 941’s?
Federal Form 941 is the form used to report payroll taxes on a quarterly basis to the IRS. If you pay employees wages, you most likely file 941 forms.
What number do I have to report from the 941’s?
In most cases, the employee wage total amounts, which are on line 5c, column 1 (Do not need the tax amounts).
Where do I get copies of the 941’s?
If you have a payroll company or an accountant, they can probably send you a packet that includes these forms on a quarterly basis. If you are missing forms, they can probably send copies to you. If you do your payroll yourself, you should have copies.
What are 944’s?
Federal Annual Federal Tax Form was created for small employers (those whose annual liability for social security, Medicare, and withheld federal income taxes is $1,000 or less) will file and pay these taxes only once a year instead of every quarter.
What if I have a question about what is on my policy?
If you have a question about what is on your policy, contact the agent or broker who sold you the policy.
How do I dispute an audit if I do not agree with the codes or payroll included on the audit?
To dispute an audit, you should contact your insurance agent or provider immediately to request an audit dispute form. Be prepared to explain the exact reason for the dispute including classification codes, inaccurate payroll reported, owner inclusion or exclusion errors, missing certificates of insurance along with supporting documentation
How can I assist my clients with their premium Audits?
Audit1 allows business owners to invite third party vendors (Accounting, Payroll & Insurance) to assist with providing necessary State Unemployment and/or Federal Tax Returns.
Can I complete the audit on behalf of my clients?
You can provide the policy and related information however, the insurance companies require the insured answer questions about their operations which you may not be completely familiar.
Can I view my clients account at any time?
Yes. Audit1 is available 24/7/365. We provide a checklist of the requirements to organize and simplify the auditing process.
Can I upload documents on behalf of my client’s?
Yes. You will be given secure access to upload and manage documents.
What can my client do to avoid owing additional premiums?
Many commercial insurance policies are based on estimates. Tracking the actual exposure (payroll or sales) will help avoid unexpected surprises. Additionally, it is critical to make sure the owners/officers are included or excluded correctly, and valid certificates of insurance are collected. Confirming the SIC and/or class codes are accurate is also important to eliminate the chance of incorrect premiums being paid.
What information is necessary to complete my audit?
The information required is dependent upon the type of coverage being provided. (Workers’ compensation is based on payroll, while General Liability is based on payroll, sales or revenue). In addition to payroll reports, there are a variety of additional reports and documentation which may be requested, including but not limited to:
- Payroll Registers or Summaries (broken out by wage type and employee)
- Complete description of your business, including hours of operations and radius of delivery
- Owner/Officer Inclusion/Exclusion forms.
- Federal Tax Returns (Needed if you do not file Federal or State wage reports)
- Sole Proprietor – Profit & Loss form 1040, schedules C pages 1 & 2
- Partnership – K-1 Distributions – US Partnership form 1065 pages 1 & 2
- Corporation – Form 1120 US Corporation Income Tax Return
- Not for Profit – Form 990 all pages
- Farm – Form 943 all pages
- IRS Form 941 (last four quarters)
- State Quarterly Wage Reports (last four quarters) FL – RT-6(formerly UTC-6) Florida Department of Revenue Employers Quarterly Report of Wages, CA – DE9C Quarterly Contributions Return and Report of Wages, NJ – WR30 Employers Report of Wages, NY – NYS-45 Quarterly Combined Withholding Wage Reporting and Unemployment Insurance Return (See complete list in your forms library)
- Cancelled checks and bank statements
- General Ledgers
- Cash Disbursement journals
- Books of original entry (including source documents)
- Job contracts and/or invoices (material and labor should be separated or itemized)
- Certificates of Insurance for subcontractors (if applicable)
- Job descriptions detailing each employee’s duties
- Supporting documentation (such as work orders or time sheets) that substantiates any split between state and federal payroll if you have longshore exposure
- Written contracts
- Executive officer payrolls and descriptions of their duties (even if the officers have elected to be excluded from state workers’ compensation coverage)
- Brochures or promotional items that offer a comprehensive description of your business operations, including your products and/or services
It is to your advantage to keep detailed payroll records, while separating wages to ensure accurate payment of premium. Such as, overtime, the amount paid in excess of straight time pay can be deducted if the excess can be verified in your records.
Will the State perform an audit as well as the insurance company?
No. Certain states do test audits to verify the insurance companies are accurately charging their policyholders however policyholders are not required to participate.
How can I enroll my clients?
Once your Audit1 user account is approved, you can enroll your clients in minutes.
What information is required to create an account for my clients?
Basic company information is required.
- Company Name
- Contact Name
- Email Address
- Phone Number
- Copy of Policy Rating or Declaration pages.
How is the policy information loaded or transferred?
Policy information can be entered, uploaded or created via secure file transfer directly from participating carriers. It can also be emailed using [email protected].
What information from the policy is needed to set up in Audit1?
The policy information required to accurately calculate the exact rate being charged per classification (class code) can be found on the “Declaration” and/or “Rating” pages found in the policy.
Does Audit1 consider the minimum and maximum payroll for owners, officers and partners?
Yes. This is a very important issue and differentiator for us. We understand and have solved what is commonly overlooked by business owners and many pay as you go reporting systems.
Does Audit1 handle included and/or excluded officers?
Yes. Policyholders can manage and view the status of officer exemptions and review the associated documentation
What is a certificate of insurance?
A certificate of insurance (COI) is a document that shows that a business has workers’ compensation coverage. The COI will show the name of the business, the coverage dates, the policy number, the carrier providing workers’ compensation coverage, the insurance agent for the business and the name of the business receiving the certificate. COIs are commonly used for businesses that are subcontracting their services to another business.
Does Audit1 assist with the management of Certificates of insurance?
Yes. Audit1 allows users to enter or upload Subcontractor information and attach their proof of insurance or exemption.
How can I assist my clients with their premium Audits?
Audit1 allows business owners to invite third party vendors (Accounting, Payroll & Insurance) to assist with providing necessary State Unemployment and/or Federal Tax Returns.
Can I complete the audit on behalf of my clients?
You can provide a significant amount of information including payroll reports and tax documentation however, the insurance companies require the insured answer questions about their operations which you may not be completely familiar.
Can I view my clients account at any time?
Yes. Audit1 is available 24/7/365. We provide a checklist of the requirements to organize and simplify the auditing process.
Can I upload documents on behalf of my client’s?
Yes. You will be given secure access to upload and manage documents including unemployment, tax and other required forms.
What can my client do to avoid owing additional premiums?
Many commercial insurance policies are based on estimates. Tracking the actual exposure (payroll or sales) will help avoid unexpected surprises. Additionally, it is critical to make sure the owners/officers are included or excluded correctly, and valid certificates of insurance are collected. Confirming the SIC and/or class codes are accurate is also important to eliminate the chance of incorrect premiums being paid.
If I am uploading payroll consistently, do I still need to upload my quarterly unemployment or tax reports?
Yes. Your insurance provider will most likely require the quarterly reports. By entering/uploading the reports each quarter you can view a comparison to verify the information matches and avoid future discrepancies.
What information is necessary to complete my audit?
The information required is dependent upon the type of coverage being provided. (Workers’ compensation is based on payroll, while General Liability is based on payroll, sales or revenue). In addition to payroll reports, there are a variety of additional reports and documentation which may be requested, including but not limited to:
- Payroll Registers or Summaries (broken out by wage type and employee)
- Complete description of your business, including hours of operations and radius of delivery
- Owner/Officer Inclusion/Exclusion forms.
- Sole Proprietor – Profit & Loss form 1040, schedules C pages 1 & 2
- Partnership – K-1 Distributions – US Partnership form 1065 pages 1 & 2
- Corporation – Form 1120 US Corporation Income Tax Return
- Not for Profit – Form 990 all pages
- Farm – Form 943 all pagesFederal Tax Returns (Needed if you do not file Federal or State wage reports)
- IRS Form 941 (last four quarters)
- State Quarterly Wage Reports (last four quarters) FL – RT-6(formerly UTC-6) Florida Department of Revenue Employers Quarterly Report of Wages, CA – DE9C Quarterly Contributions Return and Report of Wages, NJ – WR30 Employers Report of Wages, NY – NYS-45 Quarterly Combined Withholding Wage Reporting and Unemployment Insurance Return (See complete list in your forms library)
- Cancelled checks and bank statements
- General Ledgers
- Cash Disbursement journals
- Books of original entry (including source documents)
- Job contracts and/or invoices (material and labor should be separated or itemized)
- Certificates of Insurance for subcontractors (if applicable)
- Job descriptions detailing each employee’s duties
- Supporting documentation (such as work orders or time sheets) that substantiates any split between state and federal payroll if you have longshore exposure
- Written contracts
- Executive officer payrolls and descriptions of their duties (even if the officers have elected to be excluded from state workers’ compensation coverage)
- Brochures or promotional items that offer a comprehensive description of your business operations, including your products and/or services
It is to your advantage to keep detailed payroll records, while separating wages to ensure accurate payment of premium. Such as, overtime, the amount paid in excess of straight time pay can be deducted if the excess can be verified in your records.
Will the State perform an audit as well as the insurance company?
No. Certain states do test audits to verify the insurance companies are accurately charging their policyholders however policyholders are not required to participate.
How can I enroll my clients?
Once your Audit1 user account is approved, you can enroll your clients in minutes.
What information is required to create an account for my clients?
Basic company information is required.
- Company Name
- Contact Name
- Email Address
- Phone Number
- Copy of Policy Rating or Declaration pages.
How is the policy information loaded or transferred?
Policy information can be entered, uploaded or created via secure file transfer directly from participating carriers. It can also be emailed using [email protected].
What information from the policy is needed to set up in Audit1?
The policy information required to accurately calculate the exact rate being charged per classification (class code) can be found on the “Declaration” and/or “Rating” pages found in the policy.
Does Audit1 consider the minimum and maximum payroll for owners, officers and partners?
Yes. This is a very important issue and differentiator for us. We understand and have solved what is commonly overlooked by business owners and many pay as you go reporting systems.
Does Audit1 handle included and/or excluded officers?
Yes. Policyholders can manage and view the status of officer exemptions and review the associated documentation.
What is a certificate of insurance?
A certificate of insurance (COI) is a document that shows that a business has workers’ compensation coverage. The COI will show the name of the business, the coverage dates, the policy number, the carrier providing workers’ compensation coverage, the insurance agent for the business and the name of the business receiving the certificate. COIs are commonly used for businesses that are subcontracting their services to another business.
Does Audit1 assist with the management of Certificates of insurance?
Yes. Audit1 allows users to enter or upload Subcontractor information and attach their proof of insurance or exemption.
Does audit1 remind my client when Certificates of Insurance expire?
Yes. Audit1 has a scheduling function which will automatically requests new documents directly from your Subcontractor or their insurance agent.
How is the rating information created?
Audit1 uses the exact algorithms and calculations to create the class code “net rates” which are used to determine the final premiums.
Does Audit1 integrate directly with payroll companies?
Yes. For more information on approved payroll companies or becoming a partner email us – [email protected].
When is the payroll information required?
At your convenience during the policy period or immediately after the policy expiration.
Is it required to upload the payroll information by employee or department?
Yes. This is required by most insurance companies.
Can I upload the required 941’s?
Yes. 941s and other required documentation can be uploaded, managed and tracked through Audit1 in an organized fashion.