It might be hard to fathom any type of audit being beneficial, but premium audits are actually just as important to you as they are to your insurance carrier. When you were first issued your policy, the carrier looked at the estimated sales figures or payroll data that you provided to them. They calculated your premiums based on this information. Now that you have real numbers under your belt and an actual experience, the information can be reassessed to determine the correct premium amount.
Depending on how your business operates and the size of your policy, there are several different methods your insurance carrier can use to conduct your premium audit, including:
1. Mail – your carrier will mail you an audit form and the instructions to complete the form. Once completed, you will return the form by mail to your carrier.
2. Phone – your carrier will hire an independent audit company to conduct your audit over the phone.
3. Physical – your carrier will usually conduct the audit at your business, but it could be conducted at an alternative location, such as your certified public accountant (CPA’s) office.
Regardless of the method, the audit will typically include your disbursements and payroll journals, ledgers, tax and Social Security reports, state unemployment forms, and other accounting records being inspected. As you can see, an enormous amount of data will be inspected. You can use the following tips to help you prepare for your audit, help it run smoothly, and end positively.
Before The Audit Arrives
* You should try to get an idea of what the auditor will be reviewing by looking at the auditor’s work sheets and past audit billing statements.
* Determine which of your employees would be best suited to work with the auditor. Look for someone that’s both knowledgeable about the accounting records that will be used in the audit and about what work is done by various employees and departments.
* Assemble all the accounting records that will be used during the audit.
* Ensure that you have certificates of insurance on hand for all subcontractors you’ve used. Don’t forget to make sure that your documentation shows all the contractors have their own general liability insurance and workers’ compensation.
* Check that your payroll documents include a breakdown of wages according to class code, department, and employee.
The Day Of The Audit
* To make sure you have all the applicable records easily available to the auditor, you might request the audit be conducted at your business.
* Don’t be afraid to ask the auditor to explain any points that aren’t perfectly clear to you.
* Request a hard copy of what the auditor finds.
After The Audit
* Carefully assess the audit billing statement, comparing it to your original policy.
* Don’t agree to pay any additional premium dollars until after you’ve made a list of all changes and discussed any problematic areas with the auditor.
The extensive and costly damage caused by California wildfires over the last couple of years should serve as a reminder on why it’s vital to both know how you should proceed after finding yourself victim to a large-scale fire, and fully understand your fire insurance coverage before you need to call upon it.
Once the immediate danger of a fire is over, you will need to assess the situation and the resulting ramifications. If you find that the disaster has created large-scale destruction, then just the number of people impacted and the vastness of the destruction itself will most likely impact the cost and tempo of your rebuild. For example, available building materials will be depleted quickly and additional materials will be in high demand. Likewise, contractors will be available in limited numbers and be in high demand. The result – premium prices for supplies and contractors.
Given the above circumstances, it’s necessary for you to insist your insurance adjuster and contractor work together and reach an agreed price for your reconstruction. You might ask both parties to meet with you simultaneously at your home during the cost estimate of the reconstruction.
In addition to knowing how to proceed after a disaster, you also need to fully understand your insurance coverage. Do you know how much of the damage your insurance would cover?
If you opted to insure your home for 100% of its estimated replacement cost when you purchased your policy, then it should pay the cost to rebuild up to that estimated replacement cost. You can add at least an additional 25% if you opted for an extended replacement cost endorsement in your policy. Furthermore, a supplemental building ordinance endorsement in your policy will cover between 10% and 100% of the cost to bring your home up to code if there have been any new or changed construction codes since it was first constructed.
You will need to make an inventory of your home’s contents that were destroyed in the fire to receive compensation from your insurer. To make the settlement process go quickly and smoothly, make sure to provide the description; total cost of replacement, including sales tax; life expectancy; and age of each item. Don’t forget to verify the replacement cost by including the retailer’s name and phone number and salesperson’s name -or- the web addresses for any prices you obtained online. The average percentage of depreciation can be figured by dividing the age of the item by its average life expectancy. You will be paid the withheld depreciation difference on your destroyed items when you replace them with comparables if your policy only covers replacement value.
Additional living expenses, such as rent or a comparable furnished living area, may also be paid under your policy. Of course, this will be minus those expenses, such as mortgage payments and utilities, not directly resulting from your home having been destroyed. Coverage is usually a maximum of 20% of your home’s insurance limit and will generally continue for 12 months or less. Even if your home isn’t damaged, your living expenses may still be covered if your home is uninhabitable by government order. This coverage will end when the government allows you to return to your home.
The right coverage can ease some of the trauma a fire disaster causes to your life. However, you must know what you have and how it works to determine if you have the right insurance coverage in place to met your needs.