All building contractors working in North Carolina who carry either a NC general liability insurance policy or a NC workers compensation insurance policy, or both, probably know that these insurance policies are subject to an annual audit. Few contractors realize that they have the ability to tilt the odds in their favor during an annual audit. If you’re a contractor, this could mean more money for your business. Here are five tips to help you succeed in insurance audits.
Let me begin by saying that insurance auditors can be just like other people. They will be more inclined to let you do the work and save you money if you make it easy for them. What are these 5 tips?
Tip #1 – Make sure you have your insurance certificates ready. This is a must-hear tip. You should not permit subcontractors to visit your job site unless they have given you a current certificate. More importantly, ensure that the general liability limits of their policy are at minimum equal to yours. Also, ensure that your certificate shows that they have workers compensation insurance. Check the policy dates on your certificate to make sure they are still active. You should also ensure that an updated certificate is obtained in case any policies expire while the subs are still working. You should keep a record of all these certs. If the auditor comes to your office without having your certs available, he may charge you for the subcontractor’s payroll. You will have to repair it later. It’s more work to fix it later, so you might spend more time on it.
Tip #2: Take the time to study your classifications. Begin by talking to your agent about the classifications of your workers compensation and general liability insurance policies. It is important that you fully understand each class code, and that you have a properly set policy. You should not try to blur the lines between two classifications that are similar. The auditor might not approve of your plan and you should have money in case you fail.
Tip #3 – Have The Audit Done and Ready To Hand Over. After you’ve done your research on the classifications, create a spreadsheet to organize the weekly payroll into the appropriate classification. Keep a spreadsheet for workers’ compensation and general liability policies. You can hand the spreadsheet to the auditor if you do this correctly. This will prevent them from looking through your books and finding new problems that could lead to increased premiums.
Tip #4 – Keep The Overtime Payroll Separate. You can avoid extra overtime pay premiums by using the NC workers compensation policy. You must segregate this payroll to avoid work comp rates. You could add a column to the work comp spreadsheet you keep to show overtime bonus, and subtract it from total payroll for each class.
Tip #5 – Always Schedule the Audit for Friday Afternoons. This may sound silly but it is effective. If the auditor comes to your office on Friday afternoon with all the necessary information and copies of subcontractor certificates in hand, he is more likely than not to refuse to accept the figures and move on to the weekend. You will pay more for insurance if he doesn’t spend as much time digging through your books or your operations.
Most contractors have a rough idea of when the audit will take place. Others have a general idea about whether they should expect a refund or an increase in premium. Those who prepare well for the audit process can make it work in their favor to lower their insurance costs. They also have the ability to cross-check the audit report of the insurance company. Do not let the insurance company take you along. Be proactive and prepared for the audit. This will help you save money over the long-term on your insurance expenses.