What To Expect In The Workers’ Compensation Policy Audit

Your Workers’ Compensation policy will be audited approximately one to two months after your policy expiration date.

The purpose of the audit is to make sure that you’re charged the proper premium amount based on your actual exposure to risk. Your actual exposure to risk or of having a claim is directly proportional to your actual payrolls paid to employees and amounts paid to uninsured subs. Another purpose of the audit is because insurance carriers know that some unethical contractors may purposely low ball their initial policy set up in hope that the audit will never be performed.

Your insurance carrier will either send a self audit form in the mail for you to complete or they’ll send an auditor to your location or to the office of your CPA.

The auditor will inspect your records to determine your payrolls and amounts paid to uninsured subs broken out by classification of worker. The auditor will also want copies of all your certificates of insurance since there is no charge for insured subs. He will then verify your numbers by checking them against other tax reports that you send in to federal and state governments. The auditors figure that most builders would be reluctant to falsify numbers to the government. If there is a discrepancy, the auditor will want answers.

The auditor will then report his findings back to your insurance carrier and they’ll send a final audit bill that will compare your final audit premium to the estimated premium that was determined when your policy was set up. You will either get a refund (or a credit against future payments) or will owe additional premium. Any additional premium is due within 30 days.