Commercial Insurance Audits

Commercial Insurance Policies

We don’t talk a lot about commercial insurance. But at Hanby Insurance, we do write quite a bit of commercial insurance policies – specifically contractors, nonprofits and other business insurance classes. Here we will explain what a commercial insurance audit is and how to prepare for one.

When Would I Be Audited?

From time-to-time, people will ask us, “What is an audit and what are the ramifications if I am audited on my insurance?” Insurance is based on one of three things: your payroll, your gross revenue, or your square footage. That being said, if you report payroll of $100,000 but at the end of the year your payroll is $300,000, then you could be subject to a fairly large audit.

Preparing for Potential Audits

It’s important for you to know what your liability is based on. If it’s based on payroll or gross revenue/sales, make sure the numbers reported are accurate. If you see the numbers are not accurate or if you’re going to end up doing more, go ahead and tell your insurance agent early. Sometimes if your sales are going to be higher, we can actually negotiate a lower rate from the carrier based on the higher sales. But if we don’t know until after the policy renews and they get that audit back, there’s not much we can do for you.

What to Keep in Mind

In summary, keep in mind that if you have a commercial insurance policy that’s based off payroll or sales, make sure the numbers are accurate and keep in communication with your agency. We can help keep the number accurate on your policy, but we also don’t want to go over. If you estimate more than what your sales and payroll end up being, you won’t receive a refund back. The goal is to get as close to the number as possible without going over. Then you shouldn’t have any issues on your commercial insurance audits.