noun
premium audit
In plain English
The end-of-policy review where the carrier checks your actual payroll/sales against the estimates, and bills or refunds the difference.
Workers comp and GL are typically rated on payroll or sales, estimated up front and trued up at audit. If you grew, you owe more. If you shrank, you get money back. The audit is unavoidable.
What it covers
The audit process compares actual exposure (payroll, sales, units) to the estimated exposure used to set premium, and reconciles the difference into a final adjusted premium.
What it does not cover
It is NOT optional. Failing to cooperate with the audit can result in the carrier estimating high and billing you for it, plus cancellation of future renewals.
Where it trips people up
1099 contractors get pulled into your payroll if they can't show their own coverage. Always collect certificates from every sub and every 1099 — at audit, the carrier will charge you back-premium for any uninsured ones.
The technical version
A post-policy-period examination of the insured's records to determine the actual exposure base for premium calculation, typically required for policies whose premium is calculated on payroll, sales, or units.