What Is a Premium Audit? A Florida Contractor Guide's Guide

When you buy workers' compensation or general liability insurance, you pay a deposit premium based on estimated payroll or revenue. At the end of the policy year, the carrier audits your actual figures. If your actual payroll or revenue was higher than estimated, you owe additional premium. If it was lower, you get a refund.

Premium audits are standard practice for workers' comp and GL policies. They're not a sign that something went wrong — they're how the carrier reconciles the estimate with reality. The problem is when contractors are surprised by large audit bills because they didn't understand what the auditor would look at.

A workers' comp auditor will review:

• Payroll records: W-2s, 941s, payroll registers, QuickBooks reports
• 1099s: Payments to subcontractors — if they can't prove their own coverage, their wages are added to your payroll
• Certificates of insurance: COIs from every subcontractor covering the dates they worked for you
• Class code allocation: How payroll is split between different types of work
• Officer payroll: Corporate officers may be included or excluded depending on their exemption status

GL audits are typically based on revenue or payroll, depending on how your policy is structured:

• Revenue-based GL: Auditor reviews gross revenue, subcontracted revenue, and revenue by type of work
• Payroll-based GL: Similar to workers' comp — reviews payroll by class code
• Sub COIs: Even on revenue-based GL, uninsured subs can create exposure

The biggest audit surprises for Florida contractors are:

1. Uninsured subcontractors: The #1 cause of large audit bills. Without COIs, sub wages are added to your payroll.
2. Payroll growth: You hired more people than you estimated. This is expected — just make sure you're tracking it.
3. Class code reclassification: The auditor determines that some of your work belongs in a higher-rated class code.
4. Officer inclusion: Officers who were excluded from the estimate are included in the audit because their exemptions weren't properly filed.
5. Overtime mishandling: Including overtime premium in the payroll base when it should be excluded.

The best audit preparation happens throughout the year, not the week before the auditor calls:

• Collect COIs from every sub before work starts and keep them organized by sub name and policy year
• Track payroll by class code throughout the year — don't wait until audit time to figure out how to split it
• Keep payroll records that clearly separate overtime premium from regular wages
• Maintain a list of all corporate officers and their exemption status
• If you get a large audit bill, review it carefully — auditors make mistakes. See our guide on how to dispute a workers' comp audit in Florida.