Commercial Insurance Products

Commercial Premium Audit Services

The Premium Audit Process

A commercial premium audit is a review of a policyholder’s operation and records to determine the actual insurance exposure for the coverage provided.  The need for premium audits arises because many insurance policies, including Workers’ Compensation, General Liability, and Contractor policies are based on estimates when underwritten.  These policy types provide for an adjustment of the premium according to the exposures actually incurred during the policy term.  The premium auditor is responsible for measuring the exposure base accurately and classifying it properly according to the manual rules.

Donegal Insurance Group conducts a premium audit on all commercial new business (with auditable exposures) within 60 days of the expiration date of the policy.  Preparing for the premium audit can save time and money by ensuring you receive an accurate audit.  It is important that a principal of the business be available at the time of the audit to provide the details of the business operation and the employee’s duties.

During the appointment process, the premium auditor will make you aware of the records needed to perform the audit.  Please be assured, confidentiality of your information is very important to us.  The details contained on the audit worksheets are released only to the policyholder directly.

Examples of financial and business records:

  • Payroll records of original entry
  • Sales and receipts journals
  • Federal 941 and state quarterly unemployment compensation reports
  • Job cost records
  • Subcontractor costs
  • State sales tax returns 
  • Certificates of insurance for subcontractors used

Why do I need Certificates of Insurance for subcontractors?

You should always secure a certificate of insurance for both workers’ compensation and general liability coverage at the time you hire each subcontractor or independent contractor to protect your business. Certificates should be updated annually for those contractors you use regularly. Certificate limits are considered adequate when at least equal to your own limits. Any independent contractor who is uninsured or has inadequate insurance (depending on policy type), may be classified and rated as if they were your employees during the policy period being audited.

Independent contractor or employee?

If you use an independent contractor as part of your business that does not have workers’ compensation insurance, the law may hold you responsible for work-related injuries.  A few states are very specific with regulations outlining differences between independent contractors and employees.  Please check with your agent/broker for more information.  Many state workers’ compensation laws consider direction and control, as well as the relative nature of the work performed, to determine whether an injured worker is considered your employee and eligible for workers’ compensation benefits under your policy.

(Please see our Guidelines for Determining Independent Contractor Status for more details. Act 72 for PA Only.)

Premium Audit FAQ’s

  • Who do I contact with questions regarding “self audits”? 
  • How do I request audit worksheets?
  • How do I dispute a commercial audit?

For these and other premium audit questions, please contact Donegal’s Premium Audit Customer Service Line at 1-800-877-0600 x7236.

For a flyer that outlines our Premium Audit process, click here.