How a Premium Audit Works

Policies like general liability and workers' compensation are often priced upfront using estimated figures, such as projected payroll or sales for the coming year. At the end of the policy term, the insurer requests actual records (payroll reports, tax filings, sales figures) and recalculates the premium based on what really happened. If actual exposure was higher than estimated, the business owes an additional premium; if it was lower, the business may receive a refund.

What Insurers Typically Request

• Payroll records broken out by employee classification
• Total revenue or sales figures for the policy period
• Certificates of insurance for any subcontractors used
• Job descriptions confirming workers' compensation class codes were accurate

Why This Matters for Cash Flow

A business that grew faster than projected, hired more staff, or misclassified workers during the year can face a significant additional premium bill at audit time, sometimes thousands of dollars, arriving well after the money from that growth has already been spent elsewhere. Keeping accurate payroll and revenue records throughout the year, and flagging major changes to your agent early, prevents that bill from being a surprise.