Why is Your Work Comp Policy Audited
A worker’s compensation policy, unlike property or auto, is based upon your best guess for payroll. If you’re a business and you insure a building, we know exactly what that building value is and what the rate is for it. With worker’s compensation, the value isn’t really known until the end of a policy. This is why, at the end of a 12-month policy term the insurance policy sends out a third-party firm to get a clearer picture of the true value of the policy.
A work comp review is the assessment or audit of the books or records of a policyholder, to determine what the exact amount of the workers compensation premium should be.
Sometimes, if the estimation was low on payroll and your true payroll came out higher, your company will receive a bill for the difference. If you estimated high on the payroll, and your actual payroll was less than the estimation, you will receive a refund back. The audit is in place to get true value out of each worker’s compensation policy to ensure you are not being overcharged, or undercharged for any policy.
When your initial rates are set for your worker’s compensation policy, they are based on your payroll, then multiplied by a rate quantifier. The premium you pay upfront is more like a retainer than a set amount. Your actual payroll can differ as the policy is in place, causing fluctuations in the total amount due.
Types of Audits
There are three ways a payroll audit can be conducted for your workers’ comp policy.
- Voluntary audit
- Nobody goes to the workplace. Rather, the insurance agency asks for all relevant finance information from the organization with a survey getting some information about representative activity obligations, barred subcontractors or proprietors, and generally business workplace safety plans.
- Physical audit
- Organizations in more dangerous ventures may discover the insurance agency needs to play out a physical review, which means they go to an organization’s place of business to audit records, see safety practices in action, and meet with workers.
- Payroll Integrated
- Some payroll administrations offer payroll incorporation with wrokers’ comp arrangements, paying and recalculating the premium as required each payroll interval, which diminishes a great deal of unforeseen modifications toward the finish of the approach time frame.
Preparing for an Audit
Before an audit is conducted you will receive a notification letter from your insurance provider. Understand that every business is audited and this is nothing to be alarmed about.
Reach out to your policy provider and ask what is expected of you. Make the process as simple as possible for them by providing any paperwork or forms they may ask for. You will also receive a business questionnaire in the mail that should be completed and returned.
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