Contractors often face an unpleasant surprise at the end of their insurance policy year: an audit bill. Many wonder, “Why do I owe more?” Understanding how audits work can help you plan ahead and avoid big, unexpected charges.
General liability and workers’ compensation policies are priced based on estimated exposure, usually your projected sales or payroll. Since no one can perfectly predict future business, the insurance company adjusts your premium after the policy ends to match your actual numbers.
- If your business grew and sales or payroll were higher than expected, you’ll owe more.
- If your business slowed down, you may actually get a refund or credit.
Common reasons contractors get hit with extra bills:
- Be as accurate as possible up front. Don’t lowball your estimates.
- Communicate mid-term. If your business grows mid-year, let your agent adjust the policy so costs are spread out.
- Keep detailed records. Track subcontractor agreements, payroll, and sales carefully.
Audits aren’t “gotchas” they’re how the insurance system stays fair. By reporting accurately, you ensure your coverage matches your real operations, and you avoid last-minute financial strain.
How to avoid: Always try to respond to our quarter policy reviews, let us know if things have changed so you’ll never be blindsided at audit time.
Stay Tuned For Other Great Reads In This Month’s Newsletter
- Why Every Small Business Needs General Liability Insurance
- Property Owners: What Co-Insurance Means and Why It Matters
Connect with us Oklahoma Insurance Group