About Premium Audit

A Premium Audit is a comprehensive examination of a policyholder’s records and operations in order to determine the actual earned premium for the policy period. The Premium Audit verifies the accuracy of pertinent policy information such as business operations, business locations, business ownership, policy classifications, and payroll.

Why a Premium Audit is Needed

At the beginning of the policy period, the policy premium was estimated based on information about the business operations and payroll. Once the policy period has expired, the Premium Audit is able to verify the actual operational and payroll information for the period. The Premium Audit is completed in order to determine the actual premium for the policy period.

Types of Premium Audit

Preliminary Audit

For new policyholders, a preliminary audit may be performed at the policy inception and helps to ensure that the estimated exposures and classifications on the policy adequately reflect the policyholder’s operations.

Interim Audit

Interim audits may be performed quarterly, semi-annually or upon request and are used to adjust policy premium during the policy period.

Cancellation Audit

A cancellation audit may be completed upon a policy’s cancellation in order to determine the actual premium for the period that the policy was in effect.

Final Audit

A final audit is completed upon the policy expiration and determines the actual premium due for the annual policy period.


The Premium Audit Process

A premium audit may be conducted as a physical audit, a phone audit, or a mail audit. In some cases a premium audit might be waived.

If your audit is waived, Beacon uses the estimated policy payroll for the final audit figures. In effect, a waived audit closes the policy period even and does not generate additional or return premium. Notification of a waived audit is mailed to both the policyholder and their agent. A policyholder may have an actual audit completed by requesting one, in writing, within sixty days of the waived audit notification.

  • Physical Audit
  • Phone Audit
  • Mail Audit
Premium Audit Review
Physical Audit
A physical audit is completed in person by an auditor at your business location.

 

On your policy expiration date, a letter is sent to you and a copy to your agent advising that a physical audit is being conducted.

 

The letter asks you to contact the auditor within 14 days in order to schedule an audit appointment. This letter will also provide a listing of information needed for the audit.

Premium Audit Phone Audit
Phone Audit
A phone audit is completed by an auditor over the phone using information you provide.

 

On your policy expiration date, a letter is sent to you and a copy to your agent advising that a phone audit is being conducted.

 

The letter asks you respond within 15 days and provides instructions as well as a list of information required. Upon receipt of the information the auditor will contact you by phone in order to complete the audit.

Mail Audit
Mail Audit
A mail audit is completed using information that you provide by mail, email, or fax.

 

Twenty-eight (28) days prior to your policy expiration date you will receive a Mail Audit Package. This letter provides general instructions including a list of documents that need to be submitted with your mail audit.

 

For detailed instructions on how to complete the Mail Audit Form, view Mail Audit Made Simple.


Prepare for a Premium Audit

Prepare in Advance

Advanced preparation will help in the timely completion of your audit.

 

  • At the time of the audit it is important that a representative who is knowledgeable about your operations be available to answer questions about your business operations, ownership information, and related information.

Most Common Records

You will need to provide the following information as part of your audit.

 

  • Payroll Register. Preferably Year-To-Date Payroll Register which includes all employees (active and terminated) and also shows the payroll components such as gross wages, overtime wages, etc.
  •  Quarterly Payroll Tax Returns. Federal 941s and Rhode Island DET-TX-17s
  •  1099s and 1096
  •  Cash Disbursements Journal or Business Check Book
  • Sales Journal
  • Additional information may be required as deemed necessary by the auditor.

Other Records (if applicable)

You may also need to provide additional records depending on your business. 

 

  • Temporary Employment Agency Documentation:
    • DWC-09 Certificate of Workers’ Compensation Insurance, and
    • Invoices
  • Subcontractor Documentation:
    • Certificate of Workers’ Compensation Insurance, and
    • Invoices
  • Independent Contactor Documentation:
    • DWC-11-IC “Notice of Designation as Independent Contractor Form” filed with the RI Department of Labor and Training,
    • Certificate of General Liability Insurance, and
    • Invoices

After a Premium Audit


For a Physical or a Phone Audit:

On completion of the audit, the Premium Audit Report is sent by mail to the designated audit contact or company officer. The Premium Audit Report is a confidential report detailing the findings of the audit. In a separate mailing, the insured is sent the Workers’ Compensation Premium Adjustment form. This form provides a comparison of the policy’s estimated exposures and classifications with the audited exposures and classifications.

For a Mail Audit:

On completion of the audit, the Premium Accounting Audit Summary is mailed to the policyholder. This summary compares the policy’s estimated exposures and classifications with the audited exposures and classifications.

A timely review of these audit reports is important.

It is typical for the premium to change after an audit since it is common that changes would have taken place over the course of the expired policy term. If you disagree with the audit results or have questions, your agent can assist you. When a specific concern is identified, you may decide to dispute the audit. Instructions for filing a dispute are included in the cover sheet of both the Premium Audit Report and the Premium Adjustment form.


Guide to Payroll Inclusions & Exclusions

Payroll Information

Workers’ Compensation premium is based on payroll; however, payroll includes more than salaries and wages.

 

Beacon Mutual is a National Council on Compensation Insurance (NCCI) member insurance company. Here is a listing of the most common payroll inclusions and exclusions as defined by the NCCI.

Payroll Includes

  • Salaries and Wages
  • Commissions
  • Bonuses
  • Holiday, Vacation and Sick Pay
  • The straight-time portion of Overtime
  • Payments for salary reduction, employee savings plans or cafeteria plans (IRC 125)

Payroll Excludes

  • Tips
  • The extra pay for overtime. The extra pay is the difference between the regular pay rate and the overtime pay rate.
  • Severance Pay
  • Third-party sick pay
  • Tuition Reimbursement
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Related Documents

Title Description
Quick Guide to Payroll Inclusions-Exclusions

This document includes some of the most common payroll inclusions and exclusions identified during an audit.

Mail Audit Made Simple

This helpful resource explains the Mail Audit process to make your audit experience simple.

Tips for Contractors and Subcontractors

Quick guide with tips to help contractors prepare and be organized for an audit with The Beacon Mutual Insurance Company.

Independent Contractors

This document is a resource to help contractors understand the necessary information for an audit when they use independent contractors.

Questions About Premium Audits?

The Premium Audit Department is pleased to assist our policyholders in preparing for and understanding their audit.  If you have any questions, please contact a member of our audit team or call 401-825-2667 and follow the prompts.

Read our frequently asked questions for more information.

Read the FAQ

IN THE WORDS OF OUR POLICYHOLDERS

The extra services that Beacon offers as well as the premium audit experience is far and away better than services that our other WC provider offered.
Donna Prout

Ahlborg Construction Corporation

Beacon is just a good company to work with. Your company is very easy to deal with when the yearly audit is done.
Louis Notorantonio

Notorantonio Brothers Inc

I like that all aspects of premiums, audits and billings are simplified.
Donald Cournoyer

Belcour Corp