Workers compensation insurance policies are generally written for 12-month terms. At the end of a policy’s term, an insurer will often perform an audit — and they may adjust the policy’s premium. Here’s why insurers perform audits and sometimes adjust premiums, along with how Waterbury, Vermont businesses can prepare for a potential audit when their workers comp insurance policy expires.
Be Prepared for an Audit When Your Business’ Workers Compensation Insurance Policy Ends
Workers Compensation Insurance Quotes Provide Estimated Premiums
When providing quotes for workers compensation insurance policies, the premiums that insurers quote are estimated premiums. They’re based on the information that a business provides — which also are estimated figures. Just as businesses project how what they expect their labor costs to be for the year, insurers project how much a workers comp insurance policy will cost.
Since these projections are estimates, they can be slightly off. In fact, policies’ estimated premiums frequently are slightly different from actual premiums, because it’s difficult for businesses to precisely predict all the information they’re asked.
Actual Premiums Are Reconciled When Policies End
When policies expire, the estimated premiums are often checked through an audit. After the final effective date of a workers comp insurance policy, an insurer will frequently ask to see a business’ books. They aren’t trying to trap a business but simply want to check the projections that a business provided with actual figures.
When there is a discrepancy, which is common, insurers will normally adjust the premiums accordingly. If the premiums should have been less than was quoted, an insurer will usually issue a refund or credit for the difference. If the premiums turned out to be higher than expected, the insurer will issue a bill for the difference. This way, the correct premiums are assessed.
(Businesses should realize that these audits aren’t meant to trip businesses up or assess higher fees. Additionally, the formulas that insurers use to calculate premiums aren’t altered in these audits. These are simply routine procedures that insurers use to make sure the businesses they serve pay fair and accurate rates).
Businesses Can Prepare for an Audit
For businesses in Waterbury, VT that aren’t prepared for an audit, the process can be time-consuming — and any bill that’s sent can cripple a business’ finances. When businesses prepare for an audit at the end of a workers comp insurance policy’s term, however, the process typically goes smoothly and any financial impact is minimized.
Businesses can prepare for a workers compensation audit by providing the most accurate information possible when requesting quotes and keeping accurate records. Providing the best estimates possible will minimize any discrepancies, and making sure a business’ books are accurate will streamline the auditing process. By keeping up-to-date and correct records, businesses can even check how accurate their projections were and, possibly, predict whether they’ll receive a refund or bill when their policy expires.
For help coming up with accurate estimates when requesting quotes and to find out exactly what information insurers will want during an audit, Waterbury, VT businesses should contact an independent insurance agent who specializes in workers compensation insurance. An agent who has assisted other area businesses with their workers comp insurance policies will be able to explain how businesses can project the details insurers ask for when providing quotes, and suggest ways to keep financial books accurate and easy to read.