I realize the title of this article may be misleading, however, I cannot tell you how to avoid your audit altogether. I’m still trying to figure that out myself.
What I want to share with you, is how to make your insurance Audit run smoothly and make sure you don’t end up with a huge bill at the end of your policy year.
If you are with a Traditional Workers’ Comp Carrier, they ask you to estimate your payroll for the upcoming year. This is what your premium will be based on. A common thing that people do is underestimate their projected payroll in fear of having to come up with a BIG Down Payment.
I get it, I own a business myself. It can do some damage to the cash flow of a small business to pay such a large portion of the premium up front. With that being said, here are a few tips to help ease some of that pain:
1.) Set a reminder on your Calendar 3 months after the policy is bound to review your payroll. Look at the current payroll you have accumulated over that time compared to the amount you estimated for your policy. If you see that there is a huge increase start putting money aside that can help go towards the additional premium that you know will get charged at the end of the year.
2.) Set a reminder on your Calendar 6 months after the policy is bound to review your payroll. Re-visit your payroll numbers once more. If again, at that time there is a huge increase you should notify your agent so they can adjust it with the carrier. This will allow you to make your monthly payments larger, and will eliminate you having to come up with a huge lump sum at the end of the year once the audit is complete and you get the huge invoice.
3.) If you have Independent Contractors, make sure you get a copy of their Workers’ Comp certificate. If you do not get copies, the auditor will add all of those payments made to those Independent contractors into your payroll total. As I mentioned earlier, your premium is based on your payroll amount. Do you see where I am going with this? You will be paying additional premium on those subcontractors. Make sure you have those certificates on file.
There you have it; the secret to making your life easier. That’s all I have for now. I would love to elaborate more or answer any questions you may have. Feel free to contact me!