Before acquiring any insurance policy, it is critical to read all of the policy’s terms and conditions. This includes the monthly amount and level of coverage, in order to examine all aspects of an insurance claim. These include reviewing insurance paperwork and financial statements, determining risks and liabilities, and so on. This article provides a general overview of how to prepare a general liability insurance audit checklist for subcontractors and their services.
General Liability Insurance Audit: Overview
Situations in business can quickly alter due to things like new rules from the government, improvements in technology, and staffing changes. This is why small businesses need to be ready to deal with these effects. There is a big effect on how these changes affect a company’s risk of liability claims. So, check the company’s general liability insurance policy to see if it covers enough and if the policy needs any changes to its payments, deductibles, or out-of-pocket costs.
The auditor will need to see the company’s payroll details to figure out how vulnerable it is. The federal payroll tax records of the company are the best place to get this information. Another thing the inspector will do is check to see if the company’s records have the right categories for each employee. For example, a construction worker is more likely to be in dangerous situations than a database programmer. This means that the auditor has to look at each employee’s classification and figure out how much risk they are at based on their job tasks.
General Liability Insurance Audit Subcontractors
Growing their business is something that all great companies have to do at some point. But choosing the wrong way to do this can cost a lot of money. If you have too many general liability audits to handle, you might think that hiring more inspectors is the best way to get them all done. That means you have to post the jobs, meet the people who apply, and train the people who get the jobs. You can hire ISG for general liability insurance audit subcontractors instead of going through all that trouble.
In essence, an insurance company does a general liability insurance audit when they look at a policyholder’s salary records and income statements. This is to see if the policy gives a true picture of the company’s liability risk. A qualified auditor, who might work for an insurance company or a different office, performs the audit. The auditor figures out how vulnerable the company is. The audit reports don’t tell you how much a company is worth or how much tax it has to pay, but they do tell you how safe it is from liability claims.
General Liability Insurance Audit Subcontractors: All You Need to Know
The inspection is carried out by the subcontractors you hire. All subcontractors must show you proof of insurance that covers workers’ compensation and/or general liability for the time they worked for you. If you don’t have the certificate with you when the audit happens, then you, as the contractor or policyholder, have to pay the subcontractor’s workers’ compensation for the time they worked.
This means that builders need all subcontractors to have workers’ compensation insurance, even if they don’t have any employees and are just working for themselves. If they don’t, you will have to pay the fee. Also, when a subcontractor gives a Certificate of Insurance as part of a PEO lease deal, there may be a coverage gap. If the company doesn’t tell the PEO about workers or freelancers who don’t have insurance, those people could be found out. It’s possible to think of claimants as your legal staff, and you’ll find this out during your final audit. To handle this,
#1. Let Individual Subcontractors Off the Hook
In Florida or Tennessee, contractors can only exclude themselves from workers’ compensation benefits as an individual. Any kind of exemption has to be reported to the state, and the time it was good has to be before coverage began.
Since the exemption only applies to the individual contractor, any workers, employees, or uninsured subcontractors that the exempt contractor hires can put your money at risk and may affect your policy price.
#2. Exempt Workers Who Make More Than $100,000 a Year
An exempt contractor must provide either a Workers’ Compensation insurance certificate or documentation of the work performed or materials utilized within the policy period. In the absence of this data, the report might include some of the contractor’s payments.
Lastly, the award you are given must be the real thing and not a fax or photocopy. It should say on the certificate that your company is the owner of the license. It is also suggested that you check with the subcontractor’s insurance company every so often to make sure the policy is still valid.
General Liability Insurance Audit Subcontractors: Different types of audits
There are a lot of different ways to do a general liability insurance check. They are;
#1. Using the Telephone
It is possible to conduct an audit via telephone. A conference call is scheduled in advance to collect all relevant data from the company’s books in accordance with this type. Most of the time, this call lasts 45 minutes.
#2. Mail
In this case, the insurance company sends a formal email to the organization with a set of questionnaires that need to be filled out within a certain amount of time and sent back with the company’s financial papers.
#3. Through an Electronic Route
When a business is asked to submit its financial documents online for this type of audit, it does so through an online portal.
#4. Person to Person
This is one of the most common ways that surveys are done. One way for a professional auditor to look over all of the company’s paperwork and important papers is for them to walk through the building. Most of the time, this kind of audit takes two hours.
How to Prepare for a General Liability Insurance Audit
It’s not as hard as it might sound to do a general liability check. The insurance company wants to make sure that they understand certain aspects of your business’s finances and dangers. There is a good chance you will get a letter one to three months before the end of your policy’s term telling you about the audit. Hence, it’s important to quickly agree with the audit request so that your insurance coverage doesn’t end.
One good thing about a general liability insurance check is that it will help you figure out how much coverage your business needs. If you think the amount of your premium is too high for the coverage you need, then you might be able to find insurance from a different company that covers the same amount for less money.
How to Prepare for a General Liability Insurance Audit: What To Include
Having the necessary documents and information can prepare you for a smooth general liability insurance audit. Some documents you may need include:
- Certificates of insurance
- Payroll
- Revenue data
- Tax returns
- 1099s for subcontractors
- Square footage of business space
The audit might need some or all of the above details. You must send the completed audit questionnaire that your insurance company sent you along with the requested reports to comply with the audit request. Contact your carrier if you have any questions about any part of the audit process. They will be able to walk you through their special requirements.
How to Prepare for a General Liability Insurance Audit: Detailed Guide
A business owner who keeps detailed financial records will be well-prepared for a general liability insurance check since much of the information the insurer would request may be extrapolated from those documents. To prepare for an audit, all you need is quick access to your company’s financial information. As soon as you get the audit request, print or copy the papers that the insurance company needs and send them to them.
Remember that you’ll probably need to see information about your employees, yearly sales, growth, tax returns, and subcontractors. You’ll also need to give copies of the lease information that shows how many square feet your business takes up if your business has moved to new sites.
There won’t be any strange questions about your business during the audit. Instead, always keep in mind that it needs to confirm your business’s risk and coverage amounts, which depend on things like salary, sales, business size, and industry.
Insurance Audit Checklist
A checklist for audits is a tool that is used during an audit. In general, an audit is a look at or a planned, impartial, and written examination of a business’s money-related activities or management processes. For better understanding, an insurance audit checklist is a written record that helps with an audit program. Information such as the audit’s goals, evidence collection procedures, tests and methods, findings and interpretations, conclusions, and next steps (such as problem resolution and prevention) are all included.
An insurance audit checklist and services also let the inspector refer to the requirements of the standard, which makes sure that your company follows the rules. Hence, auditors use audit checklists to make it easier to gather proof that meets a set of standards set by the industry. When implemented in your company, these industry standards may have an impact on food safety, information security, occupational health and safety, or a quality management system.
Additionally, an insurance audit checklist will help your business carry out different kinds of internal and exterior audits, like first, second, and third-party audits. By doing these audits, the performance and efficiency of your company’s processes will be checked to make sure they meet industry standards.
Insurance Audit Checklist: How To Prepare
Your organization should know what needs to be inspected before it starts making an audit checklist. Therefore, the audit’s goals, criteria, and boundaries are set.
For many types of management systems, including ISO 9001, ISO 27001, ISO 13485, ISO 22000, ISO 45001, ISO 14001, and more, audits are usually based on standards like ISO 19011 and Guidelines for Reviewing Management Systems.
Then, after figuring out the standard that will be used for auditing, your organization can make a list of the requirements, including a place to write down audit proof. A comprehensive external or internal insurance audit checklist services ought to cover all areas.
Insurance Audit Services
Even though the modern world is in a state of constant change, Audit Services is still able to do audits in a timely manner while maintaining a high level of accuracy and providing excellent service to its clients. Because of this, the services and experience of the audit for both policyholders and business partners will be improved during insurance. It is common knowledge that they are highly qualified and experienced in the area that they work in.
Insurance Audit Services: Product Offerings
Below are examples of services rendered during an insurance audit:
- Accounting Book of Accounts
- Checking Taxation of Insurance Policies
- Coverage Disputes
- Complex Insurance Litigation
- Public Policy
- Trade Association Work
- Technology Risk Consulting Services
- Residual Insurance Associations
- Advisory and Consulting Services
- Assurance Services
What triggers an insurance audit?
Outlier payments and higher-than-average use of procedures are likely the most common audit triggers.
What happens when an insurance company audits you?
In this case, the carrier does an audit. First, they ask you what your true numbers were last year. Then, they use the same rate you were given at the start of the year to charge you the difference between what you paid and what the premium should have been.
What happens if you don’t do an insurance audit?
If you fail to comply with your insurance audit, you will suffer adverse consequences. Carriers can legally charge you up to three times your annual premium for a non-compliant audit.
How do you fight an insurance audit?
The dispute process is as simple as sending a letter to your insurance company (which your agent can or should write) with supporting documentation, such as missing certificates or job descriptions.
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