If you have a commercial insurance policy — especially General Liability or Workers Compensation — you may receive an audit request at the end of your policy term. Many business owners are surprised by this and often confused when a bill shows up after the policy period has ended.
We get it — it can feel frustrating. But audits are a normal and important part of how business insurance works. Here’s a simple breakdown to help you understand why audits happen and what to expect.
What Is an Insurance Audit?
An insurance audit is the carrier’s way of verifying your actual business exposure from the policy term. When you start a policy, your premium is based on estimated numbers — things like payroll, sales, or subcontractor costs. After the policy ends, the carrier reviews your real numbers to make sure you were charged correctly. If your actual payroll/sales/etc. were higher than estimated, you’ll owe additional premium. If they were lower, you may receive a refund or premium adjustment.
Why Do Insurance Audits Happen?
Audits ensure that each business pays the right amount based on real exposure, not estimates.
Audits protect:
✅ You — making sure you’re not overpaying
✅ The carrier — ensuring coverage matches actual risk
✅ The system — keeping rates fair for all businesses
Insurance is based on risk and risk changes when your business grows or shrinks. Audits keep the premium accurate.
Who Gets Audited?
Most commonly:
- Businesses with Workers Compensation
- Businesses with General Liability
- Companies with policies rated on payroll, sales, or subcontractor costs
When Do Audits Happen?
Typically, after the policy expires. You’ll receive notice from the insurance carrier with:
- A due date
- List of documents needed
- Contact info for audit support
Important: If you ignore audit requests, the carrier can charge non-compliance penalties or estimate higher exposures, which often leads to a larger bill.
What Documents Might Be Requested?
Common items include:
- Payroll reports (QuickBooks, ADP, payroll journals)
- 941 tax forms
- Subcontractor costs & certificates of insurance
- Sales reports or financial statements
Having accurate, organized records makes this process much easier.
Where Does the Audit Take Place?
Many audits today are:
- Online
- By phone
- By email upload/portal submission
For larger operations, sometimes an auditor may visit in person.
How to Minimize Surprises
To avoid unexpected bills:
- Be as accurate as possible when estimating payroll/sales at renewal
- Update your agent during the year if your business changes
- Keep certificates for subcontractors
- Submit audit documents on time
Audits aren’t a punishment—they’re simply the way insurance makes sure your coverage matches your business’s actual activity. If your business grew, congratulations, and the audit reflects that success. If it contracted, the audit ensures you aren’t overpaying.
And remember: You’re not on your own. If you ever get an audit notice and aren’t sure what to do, reach out to us. We’re here to walk you through it and make the process smooth.