What is a premium audit?

A premium audit is a process that insurance companies use to determine the final premium amount that a policyholder owes for their insurance coverage. The audit is usually conducted after the policy term has ended and is based on actual data, such as payroll records, sales figures, or operational information.

During the premium audit, the insurance company will review the policyholder's records to ensure that the initial premium estimate was accurate and that the policyholder paid the correct amount for their coverage. If there are discrepancies between the estimated premium and the actual data, the premium may be adjusted accordingly.

Premium audits are especially common in business insurance policies, such as workers' compensation or general liability insurance, where the premium is typically based on factors like the number of employees, annual sales, or square footage of a property.

It's important for policyholders to cooperate with the premium audit process to ensure they are paying the correct amount for their insurance coverage. Failure to provide accurate information during the audit could result in additional charges or penalties from the insurance company.