Insurance audits

[fdrebin]

Are there insurers that do not require yearly audits? Mine has started requiring tax returns as part of the process, which feels invasive, esp. as I have DBAs under the same LLC and report my P&L in aggregate. Never had a claim, pre-pay the year's premium, one-man show, no employees. Maybe it is a standard practice, and they're just catching up, I don't know.

 

[jblnut]

Never had an insurance audit and we have quite a pile of stuff insured on the farm. My agent comes out spring/fall and we add/remove things on the policy but never have has to give tax returns and such.

 

[nedsim]

I've been operating as an S-corp for over 30 years, otherwise much the same situation as you. I'm the sole employee, stockholder, and officer. Never made a claim. The only time I hear from the insurance company is when it's time to pay the bill and, perhaps twice in 30 years, a premises inspection.

 

[pdqdl]

Never had a claim, pre-pay the year's premium, one-man show, no employees. Maybe it is a standard practice, and they're just catching up, I don't know.

That kind of depends upon what kind of insurance is being purchased. If your policy fees are based upon your gross earnings, then you should expect them to do an audit. Many policies (especially worker's comp coverage) are payroll based, since it might be inferred that payroll is a better risk metric than gross revenue.

If you don't know, then you should ask your agent. That is what they are there for.

 

[blades]

I used to get that audit stuff, one man shop. I figured out it was a scam to charge more based on revenue. the other section is if you have employees then it is based on payroll plus revenue. Course now days I consider most ins companies to be scam artists. many yeas ago i had a couple breakins , ins paid out first time , second no. then a number years later the ins co got a new to them undewriter, i get call that underwriter took exception the biz nam and i would need to change same. told them to take a flying leap off a very high bridge.

 

[ClimberBusinessman]

Are there insurers that do not require yearly audits? Mine has started requiring tax returns as part of the process, which feels invasive, esp. as I have DBAs under the same LLC and report my P&L in aggregate. Never had a claim, pre-pay the year's premium, one-man show, no employees. Maybe it is a standard practice, and they're just catching up, I don't know.

Yes, audits are a part of business. State laws usually require insurance companies to audit so both the state's "emergency/backup fund" and the insurance company know the amount of risk they are taking on by knowing how big of a business they are insuring. There is some type of statutory threshold before which audits are required, I think it is around a $800/per year policy, which is pretty small for tree work. For General Liability, in my case, it's called a Self Audit where they want to know total payroll info. Worker's comp they want the general ledger. It's not fun, but it's all part of the business.

 

[pdqdl]

Worker's comp they want the general ledger

I can assure you that Worker's comp wants to see your annual payroll. There might be differences, however, for corporations and closely held businesses. They might presume that a single proprietorship might hold down on his payroll just to hide the insurance exposure. Pay yourself pennies, but reward the owner with huge rent payments to himself.

 

[fdrebin]

Yes, audits are a part of business. State laws usually require insurance companies to audit so both the state's "emergency/backup fund" and the insurance company know the amount of risk they are taking on by knowing how big of a business they are insuring. There is some type of statutory threshold before which audits are required, I think it is around a $800/per year policy, which is pretty small for tree work. For General Liability, in my case, it's called a Self Audit where they want to know total payroll info. Worker's comp they want the general ledger. It's not fun, but it's all part of the business.

Thank you for elaborating on the state aspect, it helps make sense of the requirement.

 

[ClimberBusinessman]

I can assure you that Worker's comp wants to see your annual payroll. There might be differences, however, for corporations and closely held businesses. They might presume that a single proprietorship might hold down on his payroll just to hide the insurance exposure. Pay yourself pennies, but reward the owner with huge rent payments to himself.

They want annual payroll as well. They want General Ledger, Cash Disbursements, W2's, 1099's, Worker's Comp COIs on any insured subs, and several other pieces of info.
The problem in my state is that the minimum owner payroll for an owner to be covered by the worker's comp is around 40k per year. Since worker's comp for the tree class code is around 8-10% of payroll in my state, that gets pretty expensive, and your "trick", of getting money out of the account under another category, like rent payment to yourself, even if legal, wouldn't work since they have a minimum payroll rating for an owner to be included. Many owners only have coverage in place for their employees, and don't cover themselves, since they aren't required to have coverage on themselves. If they have health insurance, there's a chance that will cover work-related injuries, but I've read health insurance often doesn't pay for work-related injuries.

 

[blades]

workers comp never covered biz owner. As a biz owner you are strictly on your own.

 

[pdqdl]

workers comp never covered biz owner. As a biz owner you are strictly on your own.

Not true. I am covered. Here's the deal: you must be an actual employee, appear on the payroll, and pay for that coverage. The worker's comp insurance company doesn't care what you might own as a covered employee.

 

[pdqdl]

They want annual payroll as well. They want General Ledger, Cash Disbursements, W2's, 1099's, Worker's Comp COIs on any insured subs, and several other pieces of info.
The problem in my state is that the minimum owner payroll for an owner to be covered by the worker's comp is around 40k per year. Since worker's comp for the tree class code is around 8-10% of payroll in my state, that gets pretty expensive, and your "trick", of getting money out of the account under another category, like rent payment to yourself, even if legal, wouldn't work since they have a minimum payroll rating for an owner to be included. Many owners only have coverage in place for their employees, and don't cover themselves, since they aren't required to have coverage on themselves. If they have health insurance, there's a chance that will cover work-related injuries, but I've read health insurance often doesn't pay for work-related injuries.

I am quite sure that the rules vary from state to state. I can also assure you that they don't always want all the accounting items you are listing. I am currently doing an audit for our worker's comp, and they just aren't asking for all that information. But then again, as I suggested previously, my company is a corporation. And that normally changes things.