Insurance is just about handling risks, any insurance companies would not take any risks when rates are initially set, which are paid by you as premium. They would take proper precautions to make certain that you won't die too early; it might even cause them to pay out more than the amount paid by you. The risk here stated is the pretty much the same health risks like, tobacco use, cholesterol, diabetes, over weight or fat, and few other conditions associated to poor health and early death. To account for these risks, insurance company would designate your status based on age, gender and health, and that would further determine how much you pay for a given amount of insurance.
The insurance company would ask you about your medical history and may want you to take some sort of physical exam as well. While filling up the health questionnaire you need to be faithful, in case you lie the company will find out and your policy would be canceled. And if in case your sick and were to die and then the company found out you lied earlier, if, for instance, you said you were a non-smoker but ended up dying of lung cancer from a smoking habit, they could deny the death benefits.
Some of the risk factors cannot be controlled, such as age and gender. ?Women live longer than men?, so normally women have the benefit of lower rates on insurance. And as men ten to have shorter life spans, they have the benefit of paying lower rate on annuity. Same your age also have an affect on premium. Younger people, who have much longer to pay premiums before they die, pays a lower rate compared to the older people. Your life style, your family medical history and your mental, physical condition as well matters while calculating premiums.
Most of the insurance company will ask you to undergo a physical exam, a medical doctor would check your weight, blood pressure and other vital signs, and may take a blood and urine sample. Some cases may also require extensive tests such as X-ray or EKG. Your blood and urine samples would be tested for sign of disease such as HIV virus, cholesterol level, diabetes, kidney problem, hepatitis and any other problem as well. The samples would be then screened for the findings of nicotine and some medications as well as for illegal drugs.
Some insurance companies would even improve an individual's rating, and adjust the premium, for risk factors, which reduces over time. For example someone who purchased life insurance shortly after a bout with his cancer, that person would possibly be paying high-risk rates because of his health history. But, because the risk of the cancer returning reduces over the years, that individual may contact the insurer after being cancer-free for five years and may get a lower rate.
Contractors find they must endure audits from insurance companies every year. The more prepared you are, the less likely you will be overcharged.
A premium audit is a review of your business operations, financial reports, and records to determine what to charge you for your contractor liability insurance, workers compensation, or other coverage provided. The objective is to determine the final earned premium for a given policy that was issued on the basis of payroll, sales, subcontracting costs, or other variables.
Policy premiums are based on projections you provided for payroll, sales, and perhaps subcontractor costs. Your insurance rates can vary based on this information, the audit determines what the correct premium should be based on your actual experience.
The audit is performed by an auditor selected by the insurance company. They may be an employee of the insurance company, or an employee of an auditing firm, or even an independent contractor.
THERE ARE THREE TYPES OF PREMIUM AUDITS. Depending on the size of your premiums and your operations you may get one of the following:
Physical Audit — Conducted at your premises or at a secondary location such as your accountant's office.
Phone Audit — An auditor contacts you over the phone to complete the audit. This type of audit is generally for small- to mid-sized accounts.
Mail Audit — A voluntary audit form with instructions is mailed to you. Mail audits are generally conducted for smaller accounts.
RECORDS AUDITORS MAY ASK TO SEE: Auditors are likely to ask for one or more of the following types of records:
Journals and Ledgers
Tax filings Individual
Pay Records
Time cards
Vehicle titles
Contracts with clients
Contracts with subcontractors
Records of Job Costs
P&L Statements
Balance Sheets
QUESTIONS AUDITORS MAY ASK The auditor will likely ask questions about your records or operations. They may be asking questions to determine if the correct classifications are being applied. If an auditor decides your operations are not correctly classified, it can have an unwelcome surprising result of a large audit billing. Make sure you understand your classifications, and how the boundaries of your particular classifications are defined.
An auditor may ask for a tour of your operations, if they feel it may be necessary to verify correct classifications are being used.
It is important to understand credits you are entitled to in audits.
Insurance classification and rating rules often allow credits to your audit, but your records must be maintained to provide the necessary information in detail and summary form.
If premiums are payroll based, you will pay for total remuneration as defined in the policy.
Remuneration in most states, means money or substitutes for money, and includes:
Bonuses
Commissions
Holiday Pay
Other Money Substitutes
Overtime Pay
Payments made to Profit Sharing Plans
Payments made to statutory benefit plans
The value of board and lodging
Tool Allowances
Wages
Understand the following concepts and definitions to help make sure you avoid overpaying from an audit.
OVERTIME
In most states, the amount attributable to overtime in excess of the regular time pay rate may be deducted. It must be clearly identified in your records. It must be shown separately by employee and in summary by class of work.
DIVISION OF PAYROLL
Division of an individual employee's payroll to more than one classification is not allowed, except for construction or erection operations and/or certain executive officer classifications. For construction or erection operations, the payroll of an employee may be allocated to each type of work performed on daily time cards. If not, wall wages will be charged against the highest rated classification to which the employee is exposed.
SUB-CONTRACTORS
Avoid becoming responsible for injuries to employees of subcontractor, by obtaining certificates of insurance naming you additional insured. Also, include in your subcontract agreements hold harmless and indemnification agreements in your favor. Auditors look to see if you have adhered to the terms in your policy as respects to your subcontractors. Sometimes audits go bad when the certificates are not in place, or the auditor decides payments to subcontractors are really wages to employees.
AUTOMATED RECORDS
Set up your automated records to provide audiors what they need, and you will find your audits go smoothly, and save you lots of time in the future.
DOCUMENTS YOU MAY BE ASKED FOR AT AN AUDIT
Accounts payable journal and cash dispersements
A/R journal
All vehicle leases, including but not limited to, owner-operator leases
Annual income tax statements
Documents supporting entries in the journals and financial statements
Driver and vehicle logs
Expense journal
Income Statements
Monthly Individual earnings reports
Payroll records including the payroll journal
Quarterly 941's
Registrations for owned vehicles
SUI's (State Unemployment Reports - DE 6's in California)
Both Sam & Don Bury are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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Don Bury has sinced written about articles on various topics from Health Insurance, Mortgage Insurance and Insurance for Business. Control insurance costs using our proven system. Avoid overspending by instituting solid renewal controls. Opt in to our free support system at