Helpful Tips to Prepare for Your Workers Compensation Premium Audit

You will be informed of specific documents needed prior to your premium audit, but in general you will need to provide information such as: payroll reports, check registers, cash disbursements journal (including subcontractors, casual labor and material costs) and Certificates of Insurance. You will also be asked to provide tax documents that are used to verify figures from the primary source.

  TIP: Maintain up-to-date records and save in a paper or electronic folder. Visit the Required Documents section to see examples of documents and verification records needed, which vary based upon your type of policy.

The auditor must review information documented in payroll reports (primary source) and validate these against numbers recorded in tax forms (verification source).  The auditor may also review other data sources such as your checkbook, cash receipts, general ledger, etc. to determine other payments that are not reflected in payroll records.  These documents are only used for the purpose of completing the premium audit.

  TIP: The source document should match as closely to your policy period as possible. For payroll reports, you can round to the first of the month (it is acceptable to deviate from the policy period by 30 days).  For example, if your policy period is 6/15 - 6/15 you can provide payroll for 7/1 to 7/1 or 6/1 to 6/1.

  TIP: For verification documents, if your policy period falls in the middle of the month, simply provide the most recent four filed quarterly (or annual) tax reports that most closely aligns with your policy period.

Yes, we will need to review your tax records, such as Federal 941 form, State Unemployment Wage reports (SUTA), 1099's, 1040c (Schedule C), 1120, 1065, etc. Your records are confidential and used only for the purpose of completing the premium audit.  Visit the Required Documents section to see examples of documents and records needed which vary based upon your type of policy. 

 TIP: Keep copies of filed tax forms applicable during your Workers Compensation policy term.  If your policy period falls in the middle of the month, simply provide the most recent four filed quarterly (or annual) tax reports that most closely aligns with your policy period.

The following verification records will be required:

• For a Sole Proprietor, the Profit or Loss (Form 1040) Schedule C pages 1 and 2
• For a Partnership, U.S. Partnership Return of Income (Form 1065) Page 1 and 1125-A
• For a Corporation, U.S. Corporation Income Tax Return (Form 1120) Page 1 and 1125-A

If your quarterly tax reports don't line up with your policy term, provide your last four filed quarterly reports or last annual tax report.  We will be able to reconcile to our satisfaction using the last four filed quarterly reports.

 TIP: Keep copies of filed tax forms applicable during your policy term.

Advise your Agent or Producer. Your policy may need to be endorsed to reflect the new exposures. For assigned risk coverage, some states may not be added to your policy.  Contact your Agent or Producer or company representative for additional information.

 TIP: Inform the Auditor of changes to your operations. For assigned risk coverage, inform your Producer or company representative.

If you have an assigned risk/residual market workers compensation policy and are having your premium audit conducted virtually (e.g., online and over the phone), NCCI recommends that Travelers obtain a picture of your operations. A picture representing your operations or of your job site if construction/special trades, can be uploaded to the Travelers Premium Audit secure website. In either case, if you maintain an office staff, a picture of the area in which they work is also requested to assist with classifying these employees.

Workers Compensation laws in some states may permit officers to be excluded from Workers Compensation coverage. Contact your Agent or Producer for state-specific guidelines.

 TIP: If exclusion is permissible in your state, contact your Agent or Producer for required exclusion forms immediately, and advise us in writing of any new officers during the policy term.

Your policy may be endorsed to include or exclude sole proprietors, LLC members and partners based upon state rules.

 TIP: Please contact your Agent or Producer for state-specific guidelines.

Changing your legal entity status during the policy term may impact your coverage and/or premium under the Workers Compensation Law in your state.

 TIP: Advise your Agent or Producer or our company representative immediately if you change your legal entity status, or if the ownership of your business changes.

Generally speaking, an Independent Contractor is someone who makes a business of providing a specific service for a pre-determined price, to several different customers, and controls the manner in which the work is completed.  Since definitions and requirements may vary by state, please contact your Agent or Producer with questions concerning your particular situation. Additional tests of independent status may apply.

 TIP: Maintain copies of contracts and invoices showing a breakdown of labor and materials, business cards, and Certificates of Workers Compensation and General Liability Insurance (COIs) covering the time the contractors perform work for you.

You may be responsible for employees of uninsured independent contractors/subcontractors. Without a valid certificate of Workers Compensation Insurance we may charge premium for work performed by an independent contractor/subcontractor. Since definitions and requirements may vary by state, please contact your Agent or Producer with questions concerning your particular situation. Additional tests of independent status may apply.

 TIP: Obtain and maintain valid Certificates of Insurance (COI) showing Workers Compensation coverage for all independent/subcontracted work during the policy term. Subcontractors can also request a copy of their COI from their insurance agent.

A valid Certificate of Insurance identifies the existence of a Workers Compensation and/or General Liability policy, the insurance carrier providing the coverage, policy number and policy term (dates of coverage), who is insured (the independent contractor/ subcontractor) and the certificate holder (your company).

 TIP: Make sure the independent contractor’s/subcontractor’s policy is in effect during the time the work was performed for you. Obtain proof of coverage for a previous or subsequent term as needed to cover the entire time period the contractor/subcontractor worked for you.