General Liability Audit? Breathe Easy with These Preparation Tips
A general liability audit might sound intimidating, but with proper preparation, it can be a smooth and efficient process. This blog post will equip you with the knowledge and steps you need to navigate a general liability audit with confidence.
Understanding the Why Behind the Audit:
General liability insurance protects your business from claims of bodily injury, property damage, or personal injury to a third party arising from your business operations. An audit ensures your business is classified correctly and that you’re paying the appropriate premium based on your actual risk exposure.
When to Expect an Audit:
Insurance companies typically conduct audits at the end of your policy term or after a significant change in your business operations. They might also choose your business for a random audit.
What the Auditor Will Look For:
The auditor will primarily focus on verifying information you provided when applying for your policy. Here are some key areas they might examine:
- Payroll Records: This helps determine the number of employees you have and their classifications, which can impact your premium.
- Sales Revenue: For some businesses, premiums are based on gross sales figures. Be prepared to provide accurate sales records.
- Subcontractor Agreements: If you use subcontractors, ensure you have certificates of insurance naming your business as an additional insured.
Preparing for the Audit: The Key Steps
- Review Your Policy: Familiarize yourself with the terms and conditions of your general liability policy, specifically the audit clause. This will give you a clear understanding of what information the auditor might require.
- Gather Documentation: Start collecting relevant documents well in advance of the audit. This might include payroll records, invoices, bank statements, tax forms, and certificates of insurance for subcontractors.
- Organize Your Records: Having your documents well-organized saves you time and frustration during the audit. Consider using digital files or a system that allows for easy retrieval of information.
Communication is Key:
- Be Available for the Auditor: Schedule a convenient time for the auditor to visit your business or conduct the audit virtually. Be prepared to answer their questions openly and honestly.
- Clarify Any Discrepancies: If the auditor identifies any discrepancies in your information, be prepared to explain them with supporting documentation.
The Takeaway:
A general liability audit is a standard part of the insurance process. By understanding the purpose of the audit, gathering the necessary documents, and maintaining clear communication with the auditor, you can ensure a smooth and efficient experience. Remember, a little preparation can go a long way in keeping your business protected and your premiums accurate.