What is an Audit? | Insurance Agency in North Carolina
What is an Audit?
Insurance audits are a standard part of managing business insurance policies, especially for businesses in North Carolina that carry workers’ compensation or general liability insurance. If you’ve received a notice about an upcoming audit, don’t panic. Audits are routine and designed to ensure that your insurance policy accurately reflects your business operations and payroll.
Understanding Insurance Audits in North Carolina
An insurance audit is a review of your business records to verify that the information used to calculate your premiums—like payroll, sales, and subcontractor costs—is accurate. Insurance carriers conduct audits annually or at the end of your policy term to reconcile estimates with your actual business activity.
In North Carolina, this process is especially important due to regulatory requirements set by the North Carolina Rate Bureau and the North Carolina Department of Insurance. Audits help keep premiums fair and ensure businesses are adequately insured based on their true level of risk exposure.
Why Do Insurance Companies Perform Audits?
Insurance carriers rely on estimated numbers when your policy begins. For example, if you estimate $500,000 in payroll for your workers’ compensation policy, your premium is based on that figure. If your actual payroll turns out to be $650,000, your premium needs to be adjusted accordingly. Audits protect both the insurer and the policyholder by making sure the final cost of the policy is fair and accurate.
Performing audits helps insurance providers:
- Adjust your premium based on actual figures
- Ensure coverage aligns with your business risk
- Prevent fraud and underreporting of payroll or sales
Types of Insurance Audits
Depending on your insurer and policy type, audits in North Carolina can take various forms:
- Mail Audit: You receive a form to fill out and return with supporting documents.
- Phone Audit: A representative will call to verify your information over the phone.
- Virtual or Online Audit: You submit documents securely online through a portal.
- Physical Audit: An auditor visits your place of business to review records in person.
What Documents Are Needed for an Audit?
To prepare for your insurance audit in North Carolina, gather the following records:
- Payroll reports (QuickBooks, ADP, etc.)
- Tax documents (941s, NC state unemployment filings)
- Certificates of insurance for subcontractors
- Profit and loss statements
- Detailed job descriptions
Organizing your paperwork ahead of time can streamline the audit process and reduce the chances of errors that could lead to premium increases.
How to Prepare for Your Insurance Audit
If your business operates in North Carolina, it’s essential to stay ahead of your audit by maintaining accurate records all year. Consider the following tips:
- Track employee roles and payroll accurately
- Keep subcontractor agreements and certificates updated
- Work with a local insurance agent who can help interpret audit findings
Many local businesses in cities like Raleigh, Charlotte, Wilmington, and Asheville face increased scrutiny during audits if there are large fluctuations in payroll or changes in business classification. Staying prepared helps avoid unexpected premium bills and disruptions in coverage.
How We Can Help with Insurance Audits in North Carolina
At our North Carolina insurance agency, we assist our clients through every step of the audit process. Whether you’re a small contractor in Durham or a retail business in Greensboro, our team provides guidance to ensure you’re properly classified and your documents are in order.
If you’ve received an audit notice or have questions about how audits affect your workers’ comp insurance or liability coverage, give us a call today. We’re local, knowledgeable, and ready to help protect your business.
Call us now to speak with a local insurance expert and get the support you need during your next audit.
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