Audit Premium

An audit premium results from the post-policy-period review that insurance carriers conduct to reconcile estimated premiums with actual exposure data. At policy inception, premiums for workers' compensation, general liability, and other lines are based on projected figures like payroll, revenue, or subcontractor costs. After the policy expires, an auditor reviews the insured's actual records. If actual exposures exceed estimates, the insured owes additional premium. If actual exposures are lower, the insured may receive a return premium. In COI compliance, audit premiums have indirect but important implications. A vendor who fails to pay an audit premium may face policy cancellation or non-renewal, creating a compliance gap. Additionally, vendors who significantly underestimate exposures at inception may carry inadequate limits relative to their actual operations. Compliance platforms should monitor for mid-term cancellations that may indicate audit premium disputes between the vendor and their insurer.