Completing your insurance audit is easy. Scroll down to get answers to frequently asked questions, learn why your audit is necessary, and discover how you benefit from it.
What if I have a question about what is on my policy?
If you have a question about what is on your policy, contact the agent or broker who sold you the policy.
Why do insurance companies perform audits, and how are audits conducted?
Each policy has a provision that allows the insurance company to audit the basis upon which the company determines the policy premiums. Also called premium audits, insurance companies perform such audits after the end of the policy term so they can adjust the premium from the prior period and to better estimate the basis for the premium in the next period (assuming, of course, that the policy is renewed).
How often is an audit performed?
It really depends on the insurance company and the rules of the state where coverage is. Insurers usually perform an audit once a year at the end of the policy period, although some choose to audit their clients every two years.
Is there something in my policy that gives USIAS the authority to collect information?
In a standard workers compensation policy, Part V, Sections F and G typically relate to the audit process. These sections give the insurer the right to examine any and all records necessary to determine the proper premium. If we have been contracted by your insurance company to perform audits for them and report the results, then we are legally authorized to collect this information from you. Depending on your state, the location of these clauses in your policy may vary.
In a general liability policy, Part IV, Section F typically relates to the audit process. This section gives the insurer the right to examine any and all records necessary to determine the proper premium. If we have been contracted by your insurance company to perform audits for them and report the results, then we are legally authorized to collect this information from you. Depending on your state, the location of these clauses in your policy may vary.
We at USIAS make every effort to protect your privacy and conduct our audits under strict confidentiality.
What relationship does USIAS have to my insurance company?
We have been contracted by your insurance company to perform audits for them and report the results. This is a common practice in the insurance industry.
Will my information be kept confidential?
We take the utmost care to protect your information by using advanced security and encryption technology. We do not share your information with anyone other than your insurance carrier. If you wish your insurance agent to have a copy of the audit report in the event that they request it, please indicate “Yes” in the section of the audit where we ask whether you grant us permission to release worksheets to your agent.
Can I provide the information USIAS requests using paper forms instead of online?
Yes. Just give us a call at 814.353.4257 or send an email to email@example.com request that we send a copy of the manual forms.
My company’s owner(s) don’t get paid. Do they still have to be listed on the audit?
Yes. We always need the names of all the officers and owners, including the percentages of ownership. If they do not take payroll, enter “0” for their payroll.
Do I have to include employees who no longer work here?
It depends. You must include any employees who worked during the audit period. Do not report employees who separated from the company before the audit period. If an employee worked during the audit period even for a very brief period of time, we need to know how much was paid out to that employee during the audit period.
Can I just provide information for the calendar year?
Your insurance company requests information for the audit period only—no more, and no less. Completion to the nearest month end is preferred.
What are 941’s? Where do I get them?
Information from your Federal Form 941 is required during the audit process. Form 941 is the form you use to report payroll taxes on a quarterly basis to the IRS. If anyone who works for you is paid wages, you probably file 941 forms. Some smaller employers may file a 944 annually. We can also accept state payroll tax reports.
If you have a payroll company or an accountant, they can probably send you a packet that includes these forms on a quarterly basis. If you are missing forms, they can probably send copies to you. If you do your payroll yourself, they should have copies of the forms. If you cannot find copies of the forms, please submit the audit without them and send them when you get them.
Can I just send 941’s or payroll reports without filling in the information online?
No. Please complete the audit forms with the information requested, as we prompt you for information that the forms likely do not contain, including your employees’ duties, key information about the owners and/or officers, and information concerning temporary/contract labor and subcontractors.
What number do I have to report from the 941’s?
In most cases, we need the wage amounts, which are in line 5c, column 1. We generally do not need the tax amounts.
What are “adjustments”? What do I put for that?
The adjustments are used to justify the difference between the payroll reported by employee and the quarterly reports provided. A difference could be due to the quarters not matching up with the audit period or untaxed compensation. It can also be due pre-tax amounts including medical insurance and child care.
What payroll amount should be reported in the gross payroll column?
Gross payroll includes all types of wages, including pre-tax medical, 401(k) employee contributions, vacation, bonuses, sick pay, and overtime pay.
Where do I include the overtime pay?
Any amount that was paid out to the employee should be included in the gross payroll numbers. We would then need the amount of the gross payroll that was overtime to be separated in the overtime column. For example, if John Doe’s regular payroll is $
12,000 and John Doe was paid $5,000 in overtime during the audit period, you would enter $17,000 as John Doe’s gross payroll and enter $5,000 into the overtime column.
What should be included under duties?
Please indicate actual job duties, not job titles. Be as specific as possible and avoid general terms such as “does everything,” “runs the company,” “management,” “executive” or “clerical.” For clerical employees, please indicate the their actual duties, for example, reception, accounting, bookkeeping, data entry, phones. For employees who travel for sales or client visits, please try to indicate an approximate percentage of travel or provide the number of trips per month.
What will happen if I don’t complete the audit?
Your insurance company will determine the outcome for any company not completing its audit. We recommend that you discuss possible outcomes with the agent/broker who sold you your policy.
Premium. The specified amount of payment required periodically by an insurance provider to provide coverage under an insurance policy for a defined period of time (the policy period). The premium is paid by the insured party to the insurance provider (or carrier), and compensates the insurance provider for bearing the risk of a payout should the insured have a claim.
Premium audit. . A review of actual exposure amounts for a particular policy period, normally the period recently ended. Audits can be (1) on-site/physical (not currently performed by USIAS), (2) virtual, in which we conduct the audit remotely, or (3) telephone, fax, or internet based, in which the insured sends or uploads all required information to complete the audit. Audits are required due to the estimated nature of a policy premium. An initial premium for policy types that can be audited is estimated based upon past records of a company’s operations. After the policy period ends, a premium auditor does a premium audit to determine what the exact exposures were during the policy period. Premiums for coming periods are typically estimated based upon audit results from the prior period or discussions between the insured and agent regarding anticipated and significant changes to the premium base. Either way, the current period premiums for the insureds of our clients are based upon estimates and are subject to audits for adjustment after the policy period. This is most often a part of the policy requirements to which the insured is contractually bound.
Policy period. The dates that the insurance coverage is in effect. The insurance holder would pay premiums based on the amount of exposure during those dates. At the end of that period, both parties have the option to renew the insurance agreements for another term. For many of the policies that we audit, the policy period is one year though we do have a few two-year policy periods.
Quarterly reports. Businesses with employees on their payrolls are required to file state and federal payroll tax returns every three months, based upon calendar quarters. Some smaller employers may be only required to file Federal payroll returns annually. These quarterly reports would include the total amount of payroll paid out during the quarter.
Quarter end date. The last day of the last month of the quarter. Each quarter’s end date is listed below:
First quarter, Q1: March 31
Second quarter, Q2: June 30
Third quarter, Q3: September 30
Fourth quarter, Q4: December 31
Payroll verification. The supporting documents that allow the auditor to compare the payroll reported to USIAS for audit purposes to the payroll reported to other entities (such as the IRS).
Location. The location is the physical address where the business operates. There might be multiple locations in multiple states on a policy. It is important to note the different states.
Effective/Expiration dates. The effective and expiration dates are the dates that the insurance holder could file claims against the insurance provider and the insurance provider could collect premium. The policy period begins at the noon of the effective date and runs until noon of the expiration date.
Gross wages. Gross wages is the amount of money paid to an employee before taxes and other fees are deducted from the employee’s payroll.
125 plan. Also known as a 125 Cafeteria Plan or Section 125 Plan. A Cafeteria Plan allows employees to pay certain qualified expenses (such as health insurance premiums) on a pre-tax basis. It is important that the amount paid into a 125 plan is included in the gross wages but listed separately when the insured reports payroll.
Duties vs. title.. An employee/officer’s duties are different from that person’s title. The duties are what the individual does on a daily basis whereas the title is the general name for the position that the person holds. For example, someone might be a CFO for a company. That person’s title would be Chief Financial Officer however their duties might be “Work in office doing accounting and financial management.” Duties should describe what an employee does in a typical work day, where the work is performed, whether the employee travels out of the office as part of their job and any special equipment they may use.
Subcontractor/contract labor. A contract worker is someone who performs services for a company, whose payments are usually reported on a form 1099 to the IRS, and who is not on the company payroll. Exactly who would be considered an employee or an independent contractor for workers compensation purposes is different from the IRS and differs from state to state.
Certificate of Insurance. A certificate of insurance is a document that is provided by the insurance company to an interested party on behalf of the insurance holder as a proof of insurance, (e.g., a landlord to the insured or a significant business partner). In the case of business insurance, it would be a document that details the type of insurance and the amount of coverage the business receives from the insurance provider. We advise that any insured get copies of certificates of insurance for any contract worker that they hire to do work.
FEIN. FEIN stands for Federal Employer Identification Number. A FEIN is a series of numbers used by the IRS for taxation purposes. Each entity (regardless of ownership) will have a unique FEIN.