Tips For Preparing For Your First General Liability Insurance Audit

26 April 2016
 Categories: , Blog

If you're a new business owner, understanding the fundamentals of general liability insurance is important. Your general liability policy will protect you from a host of different risks, including customer injuries and onsite accidents. In most cases, the policy premium is set according to estimated annual revenue figures or approximate total sales. At the end of the year, your insurance company will audit the policy to see if your sales estimates were accurate. If not, your premium will be adjusted for the following year. Here are some tips to help you prepare for that audit.

Gathering Documents for The Audit

The better prepared you are for the auditor, the easier the process is going to be. As you approach the last reporting cycle of your policy period, it's time to start gathering records. Pull full payroll reports for the entire policy period. You'll also want to have a record of every contractor that you worked with during that same period. Include insurance certificates for any and all contractors who provided them. Right before your audit, call the insurance companies for each contractor to be sure that the policy is in force.

Compile sales reports for the policy period. The actual sales figures for the period may affect your premiums going forward, so make sure the reports are accurate. You also need to have copies of the performance reports, including your monthly sales statements.

Preparing for Audit Day

Ensure that your department managers for each of the relevant departments clear their schedules for the days of the audit. The auditor may need to talk with them or review their records, so the more accessible they are, the better. At the very least, you should have someone accessible to represent your payables, receivables, payroll and sales departments.

Understanding The Results

Once the auditor has confirmed your sales reports, you'll be provided with revised premium figures for the period. If your sales were significantly higher than you estimated, you may even be asked to pay an increase for the period that's passed. If so, you'll be given a specific deadline by which to make this payment. If your sales were lower than the initial estimate, you may even be eligible for a premium refund.

Talk with your insurance carrier today to find out about the benefits of general liability insurance for your company. While you're at it, ask about the expected audit cycle so that you can start preparing in advance. The more you understand about the insurance company's general audit process, the easier the audit and your policy periods are likely to be.