Delaware Business Insurance Update From CNC Insurance Associates Inc., "The Gotcha's of Insurance Audits" 5-26-15

Every small business owner that has purchased commercial insurance will have to deal with insurance audits. Mostly these audits are on the liability and work comp policies. The purpose of these audits is for the insurance companies to charge the correct premium for the exposures. So if your business has sales and or payrolls that were greater than what was expected, the insurance company will charge you the difference. If they were less then expected,  the company will return the premium to you. There are a two "gotcha's" that every small business owner needs to be aware of to avoid having to pay a large additional premium after an audit. Lets go over these.


If your business is experiencing a great year and sales and payrolls are growing, don't forget to let the insurance company know. You will be able to adjust your insurance policies to pay in  during the year to avoid a large premium bill at expiration. This strategy also allows for better cash flow as you are managing your premium payments and taking the "gotcha" of a large bill at the end of the policy term, off the table.


If you use sub contractors beware. This is a big "gotcha" if the subs are uninsured or have allowed their insurance to lapse while you are using them for business. At the time of the audit, the insurance company auditor will want to see copies of valid insurance certificates that demonstrate the subcontractors you used were insured. This includes both Liability insurance and Work Comp insurance. If these certificates are not part of the audit, then expect a big bill as the insurance company will charge the subcontractors as part of your payrolls and sales. Make sure you have valid up to date certificates for your subs at the time of your audit.


If you can manage these two "gotcha's" then insurance audits are usually no big deal. Unfortunately,  most small business owners still forget to pay in during times of growth and continue to use uninsured subs. The result is always the same, a big fat premium bill at audit. Until next time be careful out there and know your risks.


G. Kevin Nemith, President CNC Insurance Assoc. & The Small Business Insurance Center
Serving DE, MD, NJ, PA, & VA
www.cncinsurance.com
www.bizinsurancetv.org



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