As a security guard company, your contracts are constantly changing. Gaining and losing contracts, getting more hours or losing hours. When you fill out an application for insurance it can be frustrating even trying to “estimate” your annual payroll. I always advise my clients to just give a rough ballpark, as we understand this frustration. When the policy is coming close to expiring (at the 10 month mark), insurance carriers will reach out to perform an audit.
The purpose of this audit is to find out the real number of guard hours/guard payroll that was accumulated throughout the policy. Once the payroll/hours are calculated, the carrier will request owed premium or return any overpaid premium. Most carriers will only audit up, meaning they will request owed premium and not give back anything you overpaid. But there are some carriers that practice auditing down, giving premium back if you overpaid.
Its very important to discuss with your broker not only the types of contracts you will work, but the estimated hours or payroll you plan on having throughout the year. This conversation can be critical in a broker’s decision of which carriers to approach. Any broker that specializes in the security guard industry will know most security companies overestimate their payroll. Therefore, they might want to place their client with a carrier that audits down. Some carriers even offer “Monthly Payroll Reporting” for Workers Compensation, meaning you pay premium that month for the exact amount of payroll that was worked for that month.
A lot of insureds we work with that become clients often were left in the dark when it came to this information. Common phrases we hear are “I wish I would’ve known”, “I had no idea that was an option available to me”, even “why am I being audited”. If there are any questions regarding payroll, guard hours, audits or available carrier options, contact a team member at GuardPro to explore what’s available.