Each year, business owners have to take valuable time from their busy schedules to complete and possibly meet with a workers compensation auditor to complete and wrap up the prior years workers compensation policy with regard to estimated payroll per class codes and actual payroll per class codes.
Nobody wants to do it, yet everyone must do it…or risk the consequences.
Worker comp audits are done for almost every workers compensation policy issued except for some owner-only policies and very small office policies. Some of the audits are simply a mail in audit with a few questions about payroll and job duties, and others are extensive, month long endeavors that you could feel like the auditor is moving into your company and setting up shop.
The size of your premium can determine which audit experience you will have to endure, but remember, you will almost always have an audit.
There is no set limit on what differentiates a mail in audit to a physical audit. Traditionally, smaller premiums will encounter mail in audits. Larger, more expansive risks will require a more thorough and in-depth audit.
Why is this? Ultimately, any insurance carrier wants to make sure that they are compensated accurately for the coverage that they are providing to the business. If you use any subcontractors, 10-99’s, or day laborers, they want to make sure that the payroll paid to those 3rd parties is accounted for.
So, if you do use any form of the above, it is very important that you obtain and save a copy of each subcontractors’ certificates of insurance in your files. That way, you can prove to an auditor (or insurance company) that they supplied their own coverage and you should not be held accountable.
One thing that we all know is that workers compensation insurance can be expensive. It is important to know that it is far less expensive to be insured and have a worker get injured than the other way around.
I could give you example after example of how a $ 2,000.00 policy incurred a loss in excess of $ 10,000.00. Good for the business owner, bad for the insurance company. On the flip side, I could give you many examples of $ 10,000.00 policies that have never had a claim. At the end of the day, insurance is there to protect you and your employees from an accident.
When an auditor does schedule their visit with your office, just know that they are there to do their job that they are paid to do by the insurance carrier. They have to know if there is any outstanding premium that needs to be paid to the carrier. It is important to supply them with your 941-payroll reports, and subcontractor costs and COI’s (certificates of insurance) from those subs as you can provide.
When it is all said and done, everybody wants what’s owed to them. Every business wants to get paid based on the terms of the agreement. Insurance companies are no different. They provide billing based on an estimate much the same way as many companies give estimates for work. The primary difference is that the work takes a year to complete.
Purchase worker compensation insurance from our agency and save money on your coverage.
