What Is a General Liability Insurance Audit

A general liability insurance audit assesses your business’s payroll and potential risks.
This process ensures that you are paying the accurate premium for your general liability insurance and that your business is appropriately covered based on its needs and risks.
General Liability Insurance Audit
General Liability Insurance Audit: Photo source (Fortinet)

What Is the Purpose of a General Liability Insurance Audit?

An audit ensures your business has the right amount of general liability insurance coverage.
Your business can change a lot from year to year.
For example, if your sales increase, you may have to hire new employees to help with increased demand.
Or, you may have downsized around the holiday season, so you had fewer employees at the end of the year.
In either case, you may need to adjust your coverage amount based on the changes to your business.

What Happens in a General Liability Insurance Audit?

The word “audit” may sound stressful, but don’t panic.
At the beginning of the year, you pay a certain amount for general liability coverage.
A general liability audit looks at:
  • Your business’ gross sales
  • Job duties of employees and independent contractors
  • Changes from the prior year
Depending on the audit results, you could:
  • Get a refund if the premium you paid at the start of the year was higher than what you need now.
  • Have additional premium because you needed more coverage, so you’ll have to pay the difference.

Preparing for a General Liability Premium Audit

Having the necessary documents and information can make for a smooth audit. Some documents you may need include:
  • Payroll or sales reports
  • Certificates of insurance
  • Tax documents
  • Subcontractor or independent contractor documents

Do I Have To Do an Insurance Audit?

Insurance companies may perform an insurance audit at the end of the year for:
If you’re notified of an insurance audit, it’s important to send your insurance company any documents or information they ask for.
Completing a general liability insurance audit, or any type of insurance audit, ensures you’re paying for and getting the right amount for coverage.
Be aware that if you don’t complete an insurance audit, your insurer can:
  • Charge a premium increase. In some cases, this can be a significant amount.
  • Cancel your policy, leaving you without coverage.
  • Report you to a collection agency if there’s a balance due on your premium and you don’t pay it.

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