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Preparing for a General Liability Audit

Time is money, so your preparation will be essential for making this process flow more smoothly. Although you probably will be informed of the specific information needed before the audit, you would do well to have the following compiled and ready to provide:

+ Payroll Summary from the prior policy period – It will be helpful for the auditor to be provided with payroll data that show upward and downward trends in payroll, as you will provide an estimation of the level of employee exposure the company faces.

+ Sales Tax Reports – Keep copies of filed tax forms applicable during your policy term or provide the most recent four filed quarterly tax reports that better align with your policy period.

+ Quarterly Employment Reports (Federal or State)

+ Information about your Subcontracted Operations
– Material costs and Labor costs should be separately tracked in your             accounting software.
– Copies of Certificates of Insurance from these Subcontractors –                     Make sure the independent contractors’/subcontractors’ policies are in       effect during their time working for you.
– Executed Subcontractor Agreement with these Subcontractors

If possible, assign an employee to organize, systemize, and maintain up-to-date records electronically for easy access. Paper records are acceptable, as well. Furthermore, as with any insurance company, being able to tell a story with your data will help build a relationship with auditors.

Depending on the audit results, you may:

+ Get a refund – if the premium you paid at the start of the year was higher than what you need now.
+ Have additional premium – Because you needed more coverage, you’ll have to pay the difference.

Your insurance policy’s declaration pages will often list the key rating factors used to calculate your premium. These typically include rates, rating classifications, and the rating basis, like your annual sales or payroll.


Chris Landry – Insurance Advisor