Which statement about premium audits is true?

Which statement about premium audits is true?

• A. It does not impact the premium.
• B. It uses only estimated payroll.
• C. It determines final premium based on actual payroll and exposures.
• D. It relates to the insured's tax status.

Answer: (C)

Premium audits adjust the price paid for coverage to match the actual exposure during the policy period. At the start, the premium is estimated using projected payroll and exposures, but once the policy term ends, the insurer audits the insured’s records to determine the true amount of payroll and the correct classifications that apply. The final premium is then based on those actual figures. If the insured’s actual payroll or exposure turns out higher than the estimate, the premium increases; if it’s lower, the premium decreases. This process ensures the premium reflects the real risk the employer faced. It’s not tied to the insured’s tax status, and it typically uses actual payroll data rather than relying solely on estimates.

Premium audits adjust the price paid for coverage to match the actual exposure during the policy period. At the start, the premium is estimated using projected payroll and exposures, but once the policy term ends, the insurer audits the insured’s records to determine the true amount of payroll and the correct classifications that apply. The final premium is then based on those actual figures. If the insured’s actual payroll or exposure turns out higher than the estimate, the premium increases; if it’s lower, the premium decreases. This process ensures the premium reflects the real risk the employer faced. It’s not tied to the insured’s tax status, and it typically uses actual payroll data rather than relying solely on estimates.