Preparing for An Audit
Preparing for an insurance audit can be quite simple if you know what information to gather and how to keep it organized. This quick fact sheet is designed to provide the top
10 tips needed when preparing for an audit with Builders Mutual Insurance Company.
As a time saver and a potential money saver, get the person who knows the business to be present at the audit (owner/a partner/a corporate officer, etc.) Businesses can fluctuate and that can affect premiums. By addressing all questions up front in the audit with the person who knows the business, we can save time and have a better picture of what to expect as we continue the audit process.
Set the Records Straight
- Payroll records—Gross Pay, Overtime Pay, Severance Pay
- Quarterly reports FICA 941 & State Unemployment
- Amounts paid to subcontractors
- Certificates of insurance on subcontractors
- Your check register or general ledger
- Your most recent tax return
- Any recent claims information
- Are they insured or uninsured?
- Require the certificate of insurance from subcontractors prior to them coming on site. You put yourself at risk if you do not ask for the COI immediately.
- Check the issued date, the insurance carrier, policy #, and the policy dates.
- A binder or certificate with TBD for the policy number is not valid.
- Handwritten certificates are not acceptable.
- Be sure they have the adequate limits on the General Liability for your work. Minimum acceptable limits for Builders Mutual on General Liability insurance are 300,000 each occurrence, 600,000 general aggregate, and 600,000 products completed.
- Get new certificates quarterly to avoid any cancellations that may have occurred or policy lapses between certificates received. Liability for your work. Minimum acceptable limits for Builders Mutual on General Liability insurance are 300,000 each occurrence, 600,000 general aggregate, and 600,000 products completed.
Subcontractors Labor vs. Material
- Workers’ Comp—Uninsured Subs: Use the payroll records of the subcontractor. If unavailable, seek documentation to show that a definite amount of the subcontractor price represents labor costs:
- If the subcontractor is a mobile equipment operator with drivers, then no less than 33 1/3% of the contract price will be applied as exposure.
- If the subcontractor price includes labor and material, then no less than 50% of the contract price will be applied as exposure. You must furnish Builders Mutual with copies of invoices from subcontractors to substantiate the labor cost.
- If the subcontractor price is for labor only, then no less than 90% of the contract price will be applied as exposure.
- For General Liability Insured Subs: Use the total amount paid to the subcontractor inclusive of materials.
- For General Liability Uninsured Subs: Builders Mutual applies the rules from workers’ comp for uninsured subcontractor exposure.
Classify and Separate
- Keep your records classified by jobsite/location. Classifications for the general contractor are assigned by job or location if the proper records are maintained.
- The assignment of the appropriate contracting classification for a particular type of work may vary according to whether your business is a specialty or general contractor. Project classifications may apply for residential general contractors, but additional classifications may apply to the operations, if proper records are maintained. A specialty contractor is a contractor who is hired to perform a single operation of a larger construction project. One classification best describes the insured’s operation at the job or location. For example, plumbing, electrical wiring, wallboard.