Everything You Need to Know About Getting an Insurance Premium Audit

When you run a small business, insurance policies like workers' compensation and general liability are essential to safeguarding the health of your company. Premium audits are a key part of ensuring you are accurately and fairly charged for the coverage.

What Is Premium Auditing?

Typically, when you open a new small business insurance policy, you provide estimates for business expenses, payroll and income, which your insurance company then uses to set your premium for the upcoming period. But as the size and circumstances of your business evolve, so too do your insurance needs.

An insurance premium audit looks back at your company’s financial records (typically payroll or sales) to determine your actual exposures to risk and adjust your premium accordingly. Here’s a quick overview of the insurance premium audit process:

What to Expect During the Insurance Premium Audit Process

When you’re insured with Farm Bureau, the audit typically takes anywhere between 60 and 90 days and involves an independent auditor. 

You’ll likely be asked to provide financial records, including payroll records, general ledgers, profit and loss statements, and tax returns. The auditor will also need an updated and comprehensive description of your business operations to make sure that the policy’s classification codes are correct. 

While the thought of an insurance audit may sound stressful and overwhelming, we will make it run as smoothly as possible, and in some cases, you may be due a refund.

How to Prepare for a Premium Audit of Your Business

The most important part of prepping for a premium audit in insurance is likely something you’re already doing: Maintaining robust accounting and employee records. Here’s what else to keep in mind:

• Organization. Are your accounting records organized by employee and the type of work they perform? This can help streamline the audit process. Be ready to provide gross pay information including, but not limited to, bonuses, commissions, holiday pay, sick pay, overtime pay, vacation pay and all pretax amounts.
• Subcontractors. Do you hire subcontractors at any time throughout the year? If so, be sure to obtain certificates of liability insurance and keep them on hand. You may also need to supply a general ledger, cash disbursements book and checkbook register.
• Timing. Be sure to address any issues found during the audit in a timely manner. This will help you avoid any conflicts that could impact your premium. 
• Communication. Your Farm Bureau agent is here to help. Plan to stay in touch with them throughout the year, alerting them to any changes to your payroll and operations that could affect your premium.

 With You Every Step of the Way

From the first dollar you earn to your retirement celebration, your local Farm Bureau agent can help ensure you have business coverage that meets your needs and the needs of your employees, business or property. Reach out today to ensure you’re prepared for whatever the future may bring.