Market & Policy · Insurance Term
Premium Audit (Payroll Audit)
Definition
A premium audit is a review, done after a policy period ends, of your actual payroll, sales or other exposures. The insurer compares them with the estimates used at the start, then charges additional premium or issues a refund.
In Plain English
Some policies are priced on numbers you can't know in advance. Workers' compensation insurance is usually based on payroll, and general liability may be based on sales, payroll or square footage. The audit settles the final premium.
Audits can be done by mail, by phone or by an auditor's visit. You'll usually be asked for payroll records, tax forms, sales figures and certificates of insurance for subcontractors. Each type of work has a Classification Code, and misclassified payroll can change the premium.
An audit is separate from your experience modification rate, but audited payroll and claims data feed into future rating.
Not sure how your policy handles this? Have us review it, or get a quote.
Example
Hypothetical and simplified: a property management company estimated $300,000 in payroll at the start of the year, but actual payroll was $400,000. If the rate is $2 per $100 of payroll, the audit would add about $2,000 of premium ($100,000 ÷ 100 × $2).
What to Watch For
- Keep payroll split by type of work so each employee is classified correctly.
- Collect certificates of insurance from every subcontractor; uninsured subcontractors may be added to your payroll.
- Update your estimated payroll mid-year if it changes a lot, to avoid a large audit bill.
- Review the audit worksheet and ask questions before you pay.
Last updated October 14, 2026 · Primesure editorial team · How We Write