Are You Prepared?
It is mandatory in the state of California for employers to carry workers’ compensation insurance. Failure to do so can result in liens, fines, and penalties.
Insurance audits are an important part of the policy process. All carriers writing workers’ compensation coverage in the state are required to perform an audit at the end of each policy term.
A workers’ compensation insurance audit is a review of the financial and payroll records of the insured at the end of the policy term. The review determines if the estimated premium declared by the insured at the beginning of the term is accurate. Class codes and actual payroll exposures are reconciled against the estimates. This protects the insured so they are only charged for their actual payroll exposure and protects the carrier so they receive the appropriate premium for the risk they assume under the policy.
If the actual audited payrolls at the end of the term are less than the estimates at the beginning of the term, there could be a return premium due to the insured. If the actual audited payrolls are more than the estimate declared at inception of the policy, an additional premium may be owed to the carrier by the insured.
Audits are conducted by mail, telephone, or a visit to your worksite by a carrier auditor.
Employers who do not comply with the request for audit from their workers’ compensation insurance carriers run the risk of having their policy cancelled, non-renewed, and subject to fines and penalties, which can be extensive.
Are you prepared? Here is a quick and easy checklist of records to have on hand for your audit.
Payroll journal and summary (or your checkbook record if you do not keep a journal)
Federal Tax Report 941 for the term of your workers’ compensation policy
State Unemployment Tax reports or employee earnings records
All overtime payroll records
Detailed description of job duties for each employee
Number of hours, days, and weeks worked annually
Payment and Cash Disbursement Records
Payments to subcontractors
Purchase of materials
Casual labor permits
Certificates of Insurance
Subcontractors and independent contractor certificates
If you want to have a successful, hassle-free audit, keep your records up to date during the year so you are not scrambling for information at audit time. Do not ignore email, fax, postal, or telephone requests for audit information. Only give the auditor the information they request and comply with the deadlines for filing the audit information to the auditor.
Workers’ compensation coverage helps keep your business financially safe. Protect your policy by having a smooth year-end audit.
CAP Physicians Insurance Agency, Inc. (CAP Agency) is a full-service insurance agency created to support CAP members. Their licensed insurance experts can provide you with a comprehensive review of your risk exposures, assess your current coverage, and provide you with comparative, competitive quotes at no cost to you.
To learn more, call 800-819-0061 or email CAPAgency@CAPphysicians.com.