Short answer
A premium audit bill after the policy ended usually means the carrier compared your estimate with your actual numbers. Some policies, most often general liability and workers’ compensation, are priced on estimated payroll, revenue or subcontracted costs. If the real figures came in higher, you owe more premium. If they came in lower, you may receive money back. You can ask to see the audit worksheet and dispute it if the numbers are wrong.
Which policies get audited
Premium audits most often apply to general liability and workers’ compensation. The carrier measures whatever the policy used to set the price.
Common measures include:
- Payroll
- Gross sales or revenue
- Subcontracted costs
Some professional liability policies may also be audited. Check the premium conditions in your policy, or ask your agent.
Why the estimate and the actual numbers differ
You give the carrier an estimate before the year starts. Business rarely lands exactly on it.
A firm that grows, adds services or hires staff can exceed its estimate. Using subcontractors who do not carry their own insurance can also raise the figure. When a subcontractor has no insurance of its own, many carriers count its cost as part of your exposure. Carriers differ, so check how yours treats it.
How a premium audit happens
Carriers conduct audits in several ways. Some use a mailed form, a phone call or a virtual review. Others schedule an in-person visit.
The carrier asks for records such as payroll reports, tax filings, financial statements and subcontractor documentation. Keeping these organized makes the process easier.
How to read the audit result
The audit worksheet shows what the carrier counted and how it priced it. Look at three things:
- The classifications assigned to your operations
- The exposure figures, such as payroll, revenue or subcontracted costs
- The rates applied to each classification
You can ask the carrier to release the worksheet to your agent. Without it, you cannot tell whether the bill reflects your real operations.
When to dispute a premium audit bill
Audits sometimes contain errors. Review the worksheet for problems such as:
- A wrong class code for the work your firm performs
- Subcontractors counted as your own payroll
- Subcontractors you did cover with certificates counted as uninsured
- Exposure figures that do not match your records
A dispute usually needs supporting documents, such as certificates of insurance and payroll records. Your carrier has its own deadline and process for disputes, so ask about it promptly.
How to avoid a surprise audit bill
A few habits reduce surprises:
- Tell your agent midyear if revenue or payroll jumps
- Collect current certificates of insurance from every subcontractor
- Keep payroll and subcontractor records organized by policy period
- Review your estimates at each renewal against actual results
Pay on time
An unpaid audit premium can lead to cancellation of a policy or referral to collections. If you plan to dispute the audit, tell the carrier and your agent before the due date. Ask whether the carrier will pause collection while it reviews the dispute.
Real-world example
A design-build firm in Florida received an additional premium bill weeks after its general liability year ended. This is an anonymized example for illustration. The carrier’s audit found more exposure than the original estimate.
We sent the invoice back to the firm with two forms. One authorized the carrier to release the audit worksheet to us. The other was a form to dispute the result. The bill had a due date about three weeks out, so the firm had limited time to review the worksheet.
A premium audit bill after the policy ended does not always mean an error. The worksheet showed us what to examine before deciding whether to pay or dispute.
What to check
- The due date on the invoice
- Whether the carrier released the audit worksheet
- The class codes assigned to your work
- How the carrier counted your subcontractors
- Whether you have certificates for every subcontractor you used
- Whether the exposure figures match your own records
- The minimum premium stated in your policy
Hardcover insight
Most audit disputes start with missing paperwork. A firm paid its subcontractors, but a certificate was never collected, so the carrier counted the cost against the firm.
A short checklist at the start of each subcontract helps. Ask for the certificate before work begins and file it with the contract. At renewal, compare the estimate you gave to your actual year. A small adjustment can keep the next audit closer to the final number.
Related questions
Can I refuse an audit?
Usually no. The policy requires it, and refusing can trigger a large estimated charge or cancellation.
Why am I charged for my subcontractors?
If a subcontractor had no insurance of its own, many carriers count its cost as your exposure. Check how your carrier handles this.
Can I get a refund?
Yes, if the actual numbers came in below the estimate. The refund may be subject to the minimum premium in your policy.
Does professional liability get audited?
Some policies are. Check your policy’s premium conditions or ask your agent.