Life is complicated, insurance doesn't have to be.
Read time: 2:45
Oh no! It’s nearing the end of another year of commercial
insurance, which means another premium audit needs to be completed.
You start to panic. Do you have all the right documents? Will the
process take a long time?
Despite their intimidating reputation, premium audits don’t
have to scare you.
Let’s go over the basics to understand why there’s no need to sweat.
So, what is an insurance premium audit?
At the start of a commercial policy term, you estimate how
much you anticipate your payroll or sales will be for the year. A
premium audit compares these estimated amounts to the actual
amounts at the end of the policy term.
After processing these numbers, your billing account receives
a debit or credit to ensure you are charged for the exact payroll or
sales coverage based upon the information you provide.
Read more: How
to Avoid Commercial Insurance Pitfalls
Premium audits occur annually when a policy expires or
at the end of the term.
Most of the time, it is within 30 days of expiration when
communication and appointment scheduling take place. We make sure to
schedule our appointments to allow ample time to prepare. But, we
understand that life happens. If you are out of town or a scheduling
conflict arises, we will try to work with you to reschedule.
Typically, audits are completed within 60 days of your
policy’s expiration, however, there are times when they may run longer.
The audit process, whether it is in-person or over the
phone, is kind of like an interview.
Depending on the audit method and the complexity of your
business, your audit appointment may take as little as a few minutes.
More complex businesses with various operations and employees will
take longer. Within a few weeks, your audit will be reviewed for
accuracy and processed by other audit associates. A declaration page
will be issued to you based on the numbers you shared reflecting
either additional earned premium due or a premium credit.
Read more: How
to Read a Car Insurance Declaration Page Quickly & Easily
The importance of premium audits for commercial
accounts is to ensure your initial exposure estimates at the
start of your policy’s term accurately reflect your actual
exposure at the end
of the term. If your business grew throughout your policy term and you
increased payroll or experienced greater sales, our exposure to a
liability loss also increased, which will result in an increased
premium for the term. On the contrary, if it was a slower year than
anticipated and your estimated payroll or sales are less, our exposure
to a liability loss will be less as well. This will result in a
decreased premium for the term. It is our goal to only charge what is
appropriate for the exposure to a liability loss presented by your
business. Premium audits make that possible.
Copyright Auto-Owners Insurance Company © 2023. All Rights Reserved.
Disclaimer: This article is not expert
advice. The analysis of coverage is in general
terms and is superseded in all respects by the Insuring
Agreements, Endorsements, Exclusions, Terms and Conditions of
the Policy. Some of the coverage mentioned in this material may
not be applicable in all states or may have to be modified to
conform to applicable state law. Some coverages may have been
eliminated or modified since the publishing of this
material. Discounts may not be available in all states.
Limitations and conditions may apply. Premiums will be based on
benefits chosen. Please check with your local Independent
Auto-Owners Insurance Agent for details.