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ARI Blog: Article

Insurance Premium Audit Tips & Tricks For Restoration Contractors (Part 1)

Premium audits can be a headache for restoration contractors. They can be time-consuming, stressful, and, if you’re not careful, result in additional premiums owed to the insurance company. Over the next two blog posts, we will discuss premium audits, how they are done, what records you need, how to save money, and the most common questions surrounding premium audits.

What Is A Premium Audit?

Premium audits for restoration contractors are typically performed on commercial insurance policies providing workers' compensation or general liability coverage.

When these policies are issued, you are asked to pay an estimated or “advance premium.” Advance premiums are based on your estimated exposures. (For restoration contractors, this is usually calculated payroll or revenue.)

Once your insurance policy expires, the insurance carrier will conduct an audit to determine the actual exposure and calculate the final earned premium. Premium adjustments are then determined by comparing audited exposures and operations with those you estimated initially.

What Records Do You Need for an Audit?

Records are essential to the audit process. They provide and verify information, save time, and minimize insurance costs. When the appointment is made, the field auditor will let you know which of the following records will be needed for your audit.

1. PAYROLL RECORDS – includes payroll journal and summary, federal tax reports (941’s), state unemployment reports, and individual earnings records. Totals should be kept for overtime when applicable.

2. SALES JOURNAL – includes all goods or products sold, rented, and distributed, as well as service, repair, and installation.

3. CASH DISBURSEMENTS – shows subcontractors, materials, and casual labor.

4. CERTIFICATES OF INSURANCE – for subcontractors used during the policy period, showing General Liability insurance in all cases, and Workers' Compensation Insurance coverage, if the subcontractor has employees.

The following blog post will provide tips and tricks for saving money and answer your most common questions.

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