Sales and Payroll Audits for Insurance

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Why do I have to have my company payroll and sales audited every year?

When an insurance policy is initially written for a business, the sales/payroll amounts are estimated as you are asked to tell the insurance carrier how you think your business will perform in the future.  By completing an audit at the end of the term, the insurance company can determine the actual figures for the prior year and return premium when appropriate or charge an additional premium if necessary. The next policy term is often based on the preceding policy terms figures, but we all know businesses fluctuate so performing an audit at the end of each term assists in keeping premiums and exposures in line with the actual business sales figures.

Audits don’t just adjust payroll/sales figures; they can also assist in uncovering additional vulnerabilities or changes in the company.  For example, when a business first started out they were a carpenter, but throughout the year several clients asked to perform minor plumbing or electrical jobs, and additional staff was hired for these jobs.  The payroll was reported to the insurance carrier, but it wasn’t mentioned that they weren’t performing carpentry work.  At audit, it is discovered that there is now plumbing and electrical exposures.  The expired policy term is amended accordingly, and now the current policy term can be modified to be sure the business is adequately insured for these increased exposures.  It would be better for these exposures to have been reported to the carrier during the policy term but audits aid in making sure exposures are not missed.  Increased sales/payroll also poses increased possibilities for claims which the insurance company needs to be aware of and prepared to assist you. Although many people look at audits as a bad thing, that doesn’t have to be the case.  Think of it this way, paying more for insurance means you had more payroll or sales than estimated.  That means business was better than you expected which is a good thing.

Audits are similar to taxes, no one wants to pay taxes, but the more successful your business, the more taxes you pay so really, paying taxes is a good thing too.  Many people think the insurance carrier is out to get as much premium as they can from the business, but in reality, they are trying to keep the insurance in line with the actual exposures of the company and verify that coverage is appropriate.  In the end, audits help the insurance carrier and the business keep accurate records and have an accurate picture of the exposures of the company. At Avery Hall Insurance Group our account executives and managers are here to help you through your yearly audits, please do not hesitate to call or email with any questions