Premium Audits

To prepare, organize your financial documents throughout the year and have them ready for the audit date to expedite the process. This includes:

• General Information: A description of the company’s business, detailed job descriptions for each employee, Owners/Officers names and titles, and description of any work done by subcontractors.
• Payroll Records: Payroll journal or registers from systems like QuickBooks, ADP, or Paychex, business checkbook, W-2s, state unemployment tax reports, 941 tax returns, overtime records, individual earnings, salaries, wages, and commissions.
• Cash Disbursement Records: Include vendor transaction reports, profit and loss statements, general ledgers, cash disbursement journals, and check registers.

Review these documents with the auditor to verify classifications and totals are accurate, thereby ensuring correct premium calculations.

When using subcontractors, detailed records are essential to prevent unnecessary liabilities. Remember to maintain:

Work Records and Payments:

Document the nature of the work performed by subcontractors along with total payments to subcontractors from the financial records mentioned above.

Certificates of Insurance (COI):

• COIs must cover the period that subcontractors worked for you and include workers' compensation and general liability coverage. Failure to provide a valid COI results in you, the policyholder, being responsible for paying premium on uninsured subcontractors for that period. Builders recommends all subcontractors — even independent ones without employees — obtain proper insurance, barring exemption by state laws. Ensure these COIs are original and specify your company as the certificate holder.
• For a smooth audit, provide original COIs from your subcontractors that coincide with your policy period. Periodically verify these certificates with the issuing insurance carrier to ensure they remain valid. Note the following non-acceptable conditions:
  • COIs from non-recognized insurance companies or those indicating "TBA" or "TBD."
  • COIs containing mismatches in the name on the payment and the COI (e.g. payment to John Smith but COI for Smith Plumbing, Inc.).
  • COIs that show NCCI as the insurance company name. NCCI is not an insurance company.
  • COIs that show "TBA" (to be assigned) or "TBD" (to be determined) as the insurance company.
• To verify workers' compensation insurance coverage, you should request a copy of your subcontractors' certificate of insurance and keep it on file for 7 years. For workers' compensation policies, if you need to verify whether a subcontractor you use has coverage, you can use the state government website to verify subcontractor insurance statuses. If subcontractor policies span over your policy period, obtain COIs for both overlapping terms.

View Sample Form