Full Definition
A premium audit is a review conducted by the insurance carrier (or an independent auditor) after the policy period ends to compare estimated exposures used to set the initial premium against actual exposures. For workers' compensation, the audit examines actual payroll by classification code. For general liability, it examines actual revenue or payroll. If actual exposures exceed estimates, the insured owes additional premium; if actual exposures are lower, the insured receives a return premium. Premium audits are mandatory for most workers' compensation and general liability policies. Accurate record-keeping and proper employee classification are essential to favorable audit outcomes.
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