Contractors insurance audits are important. They help keep insurance costs predictable for all contractors. They also create important information for insurance rate setters. Accurate payroll and sales figures help them know how much premium they must charge to cover losses.
If your audit results in extra premium, it will be due within 30 days. You want to avoid that if possible. Tell your agent if your payroll, sales or subcontractor costs are much higher than the estimate on your policy.
Why Am I Getting an Insurance Audit?
Many contractors insurance policies in Maine are auditable. Contractors’ jobs, payroll and subcontractor costs vary each year. In slow work years, claims tend to be lower. In boom years, there are more claims. Insurance companies audit to “true up” premiums with the expected claims.
Types of Contractors Insurance Audits
Your insurance company might audit your results in several ways. The method can change year-to-year. It may depend on the size of your business and current conditions.
- Online or Mailed Audit – You fill out your own audit on a form and send with quarterly 941 reports.
- Phone Audit – An auditor will set an appointment to complete the audit by phone. They’ll tell you the information you’ll need. Commonly, quarterly 941 reports, payroll reports, and a list of officers and owners of your business.
- Physical Audit – An auditor comes to your workplace by appointment. They examine your records in person. The auditor also checks that employees are properly classified based on the work they perform.
What Happens if I Don’t Complete My Contractors Insurance Audit?
Workers compensation insurers must report premiums and losses to NCCI. NCCI uses that information to set rates and experience mods. Insurers can incur penalties for slow or inadequate reporting. General liability insurance uses payroll info too. Your audit information is an important factor in insurance company rate-setting.
Insurers are not going to “go away” if you ignore the audit request. Your audit information is time sensitive, and collecting it is someone’s job.
If you fail to respond to audit requests, the insurance company will bill you for an estimated audit. You do not want an estimated audit. It increases your premium by 25% or more. And you’re contractually obligated to pay it.
Bite the bullet. Complete your audit. It’s not going to go away.
How Do I Prepare For an Insurance Audit?
- Be ready. Your audit happens at the same time every year.
- Keep good records throughout the year.
- Get certificates of insurance for your subcontractors: general liability and workers compensation.
- Tell your agent during the year about large payroll, sales or subcontractor cost changes, up or down.
- Keep track of time and payroll for different kinds of work. This can lower your workers comp costs while still protecting you and your workers. Include overtime.
- Remember that some owners or officers might have waived workers comp coverage.
- If you have a physical audit, plan to be present and available. The auditor wants to finish their work quickly and thoroughly. The faster they have what they need, the sooner you can get back to work.
Completing Contractors Insurance Audits: Who Can Help?
Completing an online or mailed audit? The insurance company should send detailed instructions. If you’re stuck, you can call the insurance company’s audit department or your agent. Sometimes, your payroll company can assist, too.
What if I Disagree With the Audit Results?
You can dispute an audit if the payroll or classifications are wrong. You can’t dispute just because the premium is higher. Your agent may be able to help, but they don’t have the information unless you authorize the insurance company to share it with them.
Maine Contractors Insurance Answers
Are you a contractor in Southern Maine? Do you have questions about Maine business insurance? Contact a Noyes Hall & Allen Insurance agent in South Portland at 207-799-5541. We have decades of experience and offer a choice of Maine’s top contractors’ insurance companies. We’re independent and committed to you.