Workers Compensation policies are subject to annual payroll audit. During the year, your business may expand or reduce the number of employees or change wage levels. So it is important to remind you about audits, how they work, and 6 ways to avoid surprises.
The initial Workers Compensation premium charged at the beginning of a policy term is a “deposit only” based on an estimate of payroll for each worker classification for the coming policy year. The insurance company will perform a payroll audit to ensure that you only pay a premium based on your “actual” payroll. An accurate audit at the end of the policy term will adjust your final
premium up or down when reconciled against the initial estimated payroll.
So, prior to your policy renewal each year you will received an audit form from the insurance company requesting actual payroll paid in each worker classification.
Nobody likes to face an unplanned expense. If you expand your payroll significantly during the year you may want to adjust your estimated payroll and pay more now into your premium deposit. That way you can avoid a large and unbudgeted additional premium expense at the end of the policy year.
Workers Compensation - Audits Explained (click to view as PDF)
The content of FAQ articles are general in nature and are not intended as a substitute for professional legal, financial, or insurance counsel for individuals. Insurance coverage forms vary by issuing company and by state. For specific advice contact us.
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