Premium Audits

It seems that I have been getting a lot of calls lately regarding premium audits. On commercial insurance policies, insurance carriers have the right to do an audit, usually at the end of the policy period. They do this to evaluate that you were charged the appropriate premium for the coverage that you received for the prior year. These audits are usually very simple and are either done over the phone with a third party auditing service, or done by a self-audit. In either case you would answer a few questions about your payroll and/or gross receipts for the policy period. Remember that your initial premium is based on estimated amounts, so at the end of the policy the carrier wants to know what the actual numbers were. This keeps people from "estimating" extremely low so as to get a cheaper premium, knowing that their actual numbers are going to be significantly higher. I generally tell people when I am asking for estimates for the coming year to give me an honest estimate, but that it is okay to estimate on the low side. Just be prepared that at premium audit time that you may be billed for additional premium at the end of the policy. It is always easier for the carrier to come back and ask you for more money than it is to get money back from the carrier later on.