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Commercial premium audits
Complying with the audit is also important to avoid noncompliance charges. The premium audit overview (BR9955 or ST7115) in your new business or renewal packet has more detailed information, and this webpage takes you through what to expect from the process.
We’ll help you prepare for and accurately complete your audit
Preparing for your audit
You’ll be notified of your audit within 20 days of your policy’s expiration date. When you’re notified, you’ll receive instructions about how to complete the audit and who will contact you.
Make sure to gather all relevant records and documents to calculate your final premium. These could include payroll, sales, subcontractors, owner-controlled insurance program (OCIP)/wrap-up insurance project records, and any other financial information that will help us determine your correct risk classification and recommended coverage amounts.
The records you provide should be from your most recent policy period. If your company has different operations and employees performing various types of work, records should reflect the pay for each type of work.
What to expect during your audit
When we notify you about your audit, we’ll include the audit method that will be used, which varies based on business profile and needs. Here’s what to expect from each type of audit.
Physical audit
A premium auditor will visit your business to review the information needed to complete your audit. The auditor will make 2 attempts to reach you directly. If we don’t hear from you, we’ll contact your agent for assistance, and a 10-day final warning letter will be sent if we don’t receive the information (please see the Noncompliance section). Once the final report has been compiled, the auditor will review it with you.
Virtual audit
A premium auditor will contact you by phone or email to gather the information needed to complete your audit. The auditor will make 2 attempts to reach you directly. If we don’t hear from you, we’ll contact your agent for assistance, and a 10-day final warning letter will be sent if we don’t receive the information (please see the Noncompliance section). Once the final report has been compiled, the auditor will review it with you.
Telephone audit
A premium auditor will contact you by telephone to gather the information needed to complete your audit. The auditor will make 2 attempts to reach you directly. If we don’t hear from you, we’ll contact your agent for assistance, and a 10-day final warning letter will be sent if we don’t receive the information (please see the Noncompliance section). Once the final report has been compiled, the auditor will review it with you.
Online audit
We will mail up to 3 notices (2 audit forms and 1 warning letter), as needed. An audit representative may follow up once by phone or email if information is missing.
Mail statement
A premium audit form and reporting form will be sent to gather relevant audit information.
In all of these audit methods, your confidentiality is our top priority. Please keep in mind that information gathered as part of the audit may be shared in accordance with Nationwide’s privacy policy.
After the audit
Once your records have been reviewed, our audit team will update your policy. We’ll generate an audit statement and mail it to you. Any billing changes will take effect 14 days after we update your policy. Your current term’s policy may also be updated.
If you find discrepancies with your final audit, please contact our audit department immediately.
Noncompliance
If your auditor isn’t able to obtain the required documents from you, we’ll mail a 10-day final warning letter. Ultimately, if there’s no response, we will update your policy with a penalty of up to 3 times the policy premium.
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Your policy is usually initially based on estimated exposures. The purpose of the audit is to make sure that we have the actual exposures for the policy period and that you have adequate coverage.
We encourage agents to help with the audit process.
When we mail out the premium audit form, we ask for the appropriate information needed depending on the exposure on your policy: payroll, sales-based, or other. Common financial documents requested are payroll records, 941s, W2 forms, Quick books reports, unemployment reports, profit and loss statements for the audit period. We may also request an annual 943 (applicable for Farm/Agricultural operations), as well as 941s and/or state unemployment reports for the most recent four quarters corresponding to the audit period. Please do not include any social security numbers. Submitting your report without such verification will require us to issue an audit on a non-productive basis. Premium cannot be returned without verification.
If your business used subcontractors, we will ask for the subcontractors’ certificates of insurance and the total cost for all work performed by anyone other than direct employees during your policy period (this includes 1099 laborers, independent contractors, casual laborers, subcontractors, etc.). We will request costs separated by labor and material/equipment furnished. Please note that breakdowns by percentages will not be accepted. You will need to provide proof of coverage comparable to your policy’s line of business (General Liability and / or Workers Compensation). The date of coverage must cover the period of time work was performed during your policy period. Coverage limits will also be reviewed to determine adequate coverage. Adequate insurance means the subcontractor carries liability coverage and limits of no less than $1,000,000 each occurrence/$2,000,000 general aggregate/$2,000,000 products-completed operations aggregate for the period of time the work was performed for you. Any limits less than the above will be considered inadequate and payroll charge will be included on your audit.
Most state Workers Compensation laws will hold you responsible for injuries sustained by an employee of an uninsured subcontractor. You may also be responsible for the legal liability of your subcontractors. To protect yourself, be sure to secure a Workers Compensation Certificate of Insurance from all subcontractors prior to the subcontractor beginning any work on behalf of your business. If no evidence of insurance is available, the subcontractor’s payroll may be added to your premium base as payroll. Depending on state law, if a person is claimed to be a subcontractor, but they do not have their own employees and their duties closely resemble those of an employee of yours, that person may be considered an employee for audit purposes.
Payroll: Many of the premiums for your insurance are based on payroll which is defined as total remuneration. Remuneration includes: Wages, Commissions, Bonuses, Overtime Pay, Holiday Pay, Vacation Pay, Sick Pay and Payment for Piece Work
Overtime: The amount paid in excess of straight time can be deducted if the excess can be verified by your records. Your records must show overtime separately by employee and totaled monthly and quarterly. This is not applicable in PA (WC) and DE (WC)
Division of Payroll: Division of an individual employee’s payroll to more than one classification is not allowed. Exception: For construction or erection operations, the payroll of an employee may be allocated to each type of work performed if proper records are kept. Payroll cannot be divided between construction of office or sales classifications. Please note that classification breakdowns by percentages will not be accepted.
Gross Sales: Sales information must be kept separately for each location with monthly and quarterly totals by the type of product sold. Please note that classification breakdowns by percentages will not be accepted.
On the audit form we will give the appropriate contact information to mail, email, or fax back the audit information. If completing the audit via the enclosed forms, please use black ink
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- When providing audit information or documentation, please do not include any Non-Public Information or Personal Protected Information such as: Social Security Numbers, Taxpayer Identification Numbers, PIN, banking or credit card information, etc. This information should be redacted prior to submitting audit documentation.
- If completing the information online via the website above for multiples Lines of Business, please check the “Forms” drop-down to ensure that all applicable forms were completed prior to submitting.
We've compiled a list of terms and definitions to help you make sense of some of the premium audit terms on our website. Keep in mind that our terms and definitions are intended for information purposes only, and the way they're interpreted or applied may vary from state to state.
Audit period
The policy period for which you will provide the information for the premium audit.
Casual labor
Work that is not typically in the scope of your normal business operations and does not advance your business. Usually performed on an irregular or one-time basis.
Contract labor
Refers to work done by independently employed workers who have a contract with your business for a limited period of time, use their own equipment and pay taxes on their own.
COI
Certificate of Insurance: a document from an insurance company that a subcontractor uses to prove to your business the existence of his own insurance coverage for a set period of time.
Description of operations
Detailed overview of your business and how it operates, including the industry and type of clients served, the product and/or service offered, and how the product and/or service is delivered.
Federal 941/quarterly reports
Employers who withhold income, Social Security or Medicare taxes from employees’ paychecks or who pay the employer’s share of Social Security or Medicare taxes file these forms with the IRS to report these taxes.
Gross overtime
The amount paid for hours worked above the employees’ regular 40-hour workweek.
Gross sales
The total amount charged by your business and any other entity operating under your business’s name for all products sold or distributed, all services performed, all dues or fees collected and/or all properties rented, excluding any taxes.
Gross wages/gross payroll
Total compensation paid to employees prior to any deductions. Includes wages or salaries, commissions, paid time off, bonuses, overtime and stipends.
Stopgap
The total gross payroll for all employees and officers/owners as reported on the tax forms during the policy period.
Ownership type/legal entity
The legal structure of your business (corporation, individual, partnership, LLC, LLP, nonprofit, etc.).