General liability insurance offers protection for your business in case of a variety of potential issues. For example, you may have some financial protection if someone is injured on your property or there's an accident that affects a customer or client. In most cases, the policy premiums are rated according to your company's annual revenue. The premiums are usually set based on an estimate and then adjusted according to your actual figures at the end of the fiscal year. This adjustment is done through a premium audit. Here are some tips to help you tackle your first premium audit for your general liability insurance.
Preparing For The Audit
Although you may not know when the audit will happen, you should start preparing at the end of your final reporting period for the policy term. For example, if your insurance policy runs the calendar year, you'll want to start preparing your audit papers when you start gathering your December month-end and year-end reports.
Gather copies of your payroll records for the entire policy period as well as statements that detail any contract work payments. If you did pay any contract workers, gather copies of their certificates of insurance. A week or so before the auditor arrives, call each of the insurance providers and validate the policy information. If you can get the validation in writing, that's even better.
You should also generate full sales reports for the policy period. These statements must be accurate. Include any returns, allowances or discounts. You may even want to have your reports broken down by quarter with monthly totals. The auditor will look to compare your actual sales figures against the estimates that your premiums were based on.
Understanding The Audit Results
Depending on how the figures from your actual results compare to your estimates, you may either owe more on your premium or be due a credit. If your sales figures are higher than you estimated, the auditor will provide you with an adjusted balance and perhaps an offer of a payment arrangement. On the other hand, if your sales were lower than your estimates, you may be due a premium reduction. In most cases, that will appear as a reduction in your next term's premium.
The audit will also be used to help create an estimate for your next policy premium, too. The auditor will use your actual sales and an estimated growth rate percentage to determine the sales figure estimate and corresponding premium for your upcoming policy period. For more information on business insurance, check out websites like http://www.mattroenkerinsurance.com.
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