Part 2: Insurance Audit Season: What Business Owners Need to Know Before Year-End

The fourth quarter isn’t just about closing deals and prepping for tax season—it’s also when insurance carriers gear up for year-end audits. For many business owners, this audit can feel like a surprise pop quiz on your operations, payroll, and risk exposures. But if you know what to expect—and prepare accordingly—you can avoid unexpected premium adjustments and stay in control.

What Is an Insurance Audit?

An insurance audit is a routine review that ensures the premiums you’ve been paying throughout the year match your actual business activity. It’s most common for workers’ compensation, general liability, and some commercial auto policies.

Auditors will typically request:

• Final payroll numbers

• Subcontractor details (including insurance certificates)

• Gross sales and revenue

• Job classifications and duties

• Certificates of insurance from vendors or independent contractors

Why Do Audits Matter?

Your premium is based on estimates—like projected payroll or annual revenue. If you’ve had more growth, new hires, or higher sales than expected, you may owe additional premium at year-end. On the flip side, if your business scaled back, you may be eligible for a return premium.

📉 Underreporting or misclassifying employees can trigger penalties—or worse, coverage gaps.

Industries That Feel It the Most

• Construction: Labor costs often fluctuate, and the use of subcontractors (especially uninsured ones) can heavily impact audits.

• Hospitality: High turnover, seasonal workers, and variable sales make recordkeeping essential.

• Cannabis: Rapid growth in new markets makes accurate payroll and operations tracking critical.

• Professional services: Remote teams and contractors may require special handling under liability policies.

Tips to Prepare Now (Not After the Fact)

✅ Get your records organized. Pull your payroll, 1099s, sales numbers, and employee classifications.

✅ Confirm subcontractor coverage. If you used outside labor, make sure you have proof of their insurance—otherwise, you might be charged as if they were on your payroll.

✅ Talk to your broker. A proactive review with your insurance advisor (that’s us!) can help you avoid surprises and plan for next year’s needs.

Avoid the Surprise Premium

An insurance audit shouldn’t feel like a penalty—it’s an opportunity to make sure your coverage reflects your actual operations. At BudRisk, we help clients prepare in advance so they don’t get blindsided.

Need help organizing your records or reviewing your policy before the year ends? Let’s talk.

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