When you took out a business insurance policy, your Alabama insurance agent took into account many factors when determining the exact insurance premium figure. However, it is the end of your policy year and you just got notified of an impending premium audit. What that means for you is that an audit is scheduled to review essential financial information to ensure that the current premium being charged is adequate to reflect your business operations. While this is a standard practice in the insurance industry, it still means you must focus on being premium audit prepared.
Why is There a Need for a Premium Audit?
Your business insurance premium is routinely reviewed at the end of your policy period as a way to confirm whether this amount is truly reflective of your Alabama business transactions. The findings may reveal you have been paying too much premium OR could disclose your current premium needs to be increased to better reflect your business operations. Your payroll, detailed financial records, payouts, losses, and tax returns are all taken into account during the audit so as you can imagine, it is vital to maintain organized records on all your business accounts/transactions.
The insurance auditor will contact you PRIOR to the audit date to inform you of all the financial documents needed for the review. The size of your business will typically dictate the types of documents and information needed for the audit and you will always be aware of the exact date the audit will take place.
Some Typical Financial Data the Auditor May Require, but Not Limited to:
Being a part of a business audit can generate stress and anxiety for you as the business owner, but keep in mind that if you are in the practice of keeping organized, precise records, it should run fairly smoothly. Below are just some of the possible records that may be inspected for review in the audit process:
- Payroll Registers
- General Ledgers
- Quarterly Tax Returns/Documents
- Cash Payouts
- Contractor and Subcontractor Accounts (Including Certificates of Insurance)- *Keeping precise documentation of total payouts to all contractors/subcontractors for all work performed is essential and will be reviewed.
The Findings of the Audit
After the audit is thoroughly reviewed and completed, you will be notified of any adjustments deemed necessary based on the findings. Perhaps you will receive a notice there will be a returned premium amount OR a premium amount due, in which case you will be issued a Premium Adjustment Statement. In some instances, the audit will reveal no necessary changes to the business insurance premium. It is recommended that you gain access to the findings and maintain them for your business records. If you have any questions regarding a premium audit, feel free to contact Burkett & Associates Insurance at (256) 704-7400.