If Your Business Lost Its Most Important Person Tomorrow, Who Would Pay for the Gap? A Guide to Key Person Life Insurance

Many business owners get an unpleasant letter a few months after their workers’ compensation or general liability policy renews: an additional premium bill. The cause is the premium audit, the insurer’s review of your actual payroll, sales, or subcontractor costs after the policy period ends. A good year of growth often shows up here first. Here are the questions owners ask most, with plain answers.

What is a premium audit, and why does it happen?

Workers’ comp and many general liability policies are priced on estimates made at the start of the policy, usually payroll for comp and payroll or sales for liability. Once the policy ends, the insurer compares those estimates to your actual figures and adjusts the premium. If payroll grew 20% because you hired or gave raises, the premium generally grows with it. If business shrank, you may receive a refund. Audits may be done by mail, by phone, or in person, depending on the size of the policy.

What counts as payroll in a premium audit?

More than many owners expect. Under the payroll rules in the NCCI Basic Manual, used in many states, payroll includes wages and salaries, bonuses, commissions, holiday and vacation pay, and employee salary reductions for retirement or cafeteria plans. Excluded items include tips, severance pay, employer contributions to retirement or cafeteria plans, and expense reimbursements your records verify as valid business expenses.

Can overtime be excluded?

Often the extra portion can, if your records support it. Under the NCCI rules, only the amount above straight-time pay is excluded, and only when your records show overtime separately by employee and in summary by classification. If you record time-and-a-half as one combined figure, one-third of that total is excluded. Ask your payroll provider to break out the overtime premium now so it is ready at audit time. Some states use their own rating bureaus, so confirm the rules that apply to you.

Why do class codes matter so much?

NCCI, the rating organization used for workers’ comp in many states, maintains the classification system. Each employee’s payroll is assigned to a class code with its own rate, and clerical rates are far lower than field or warehouse rates. If records do not clearly separate an employee’s office work from higher-risk work, the auditor may assign all of it to the higher rate. Keep job descriptions current and track divided duties where the rules allow it.

Do owner and executive officer wages count?

Usually, within limits. Many states set minimum and maximum payroll amounts for executive officers, and some allow certain owners to exclude themselves from coverage. The rules vary by state and entity type, so confirm how your owners are treated before the auditor arrives.

What about subcontractors?

This is the most common source of surprise bills. If a subcontractor cannot show a valid certificate of insurance for the period they worked for you, the insurer may add what you paid them to your own payroll. Collect certificates before work begins, track expiration dates, and keep copies with your payment records.

How should we prepare for the auditor?

• Gather payroll reports, quarterly tax filings, and a general ledger for the full policy period.
• Separate overtime premium pay and verified expense reimbursements.
• Organize subcontractor payments with matching certificates of insurance.
• Prepare job descriptions for employees whose duties span classifications.
• Ask for the audit worksheet afterward and dispute errors in writing. Our commercial insurance team can review a worksheet with you.

What if our estimates are already out of date?

Call your broker mid-term. Many insurers will adjust the estimated exposure on the policy, which spreads the difference across remaining installments in place of one large bill later. Owners who grew quickly this year should make that call before year-end. Clear payroll categories also make related compliance work easier, which our HR compliance and legal team can support.

Looking Ahead to 2027

Set up next year’s records with the audit in mind from the first payroll in January: separate overtime premium pay, code divided duties, and track subcontractor certificates as you go. Revisit your estimates at midyear, especially if hiring or revenue plans change. Tooher-Ferraris will help you build a premium audit routine so your 2027 audit holds no surprises.

The first storm of the season usually brings the first slip-and-fall claims. Customers fall in parking lots, delivery drivers fall on steps, and employees fall walking in from their cars. Falls are a serious and costly injury category: the Bureau of Labor Statistics counted 674,100 private-industry injuries from slips, trips, and falls in 2021 and 2022 that led to days away from work, job restrictions, or transfers, nearly 20% of all reported cases. Customers and visitors who fall on your property can bring premises liability claims against your general liability policy, and employees who fall usually file workers’ compensation claims. Here are seven things to have in place before the snow starts.

1. A Written Snow and Ice Plan

Decide who clears what, when, and how. Set clear triggers, such as plowing at two inches and treating walkways before opening hours, and name a backup for weekends and holidays. Include a plan for overnight refreezing, since a lot cleared at 5 p.m. can turn to ice by opening time. A written plan shows that the business took reasonable steps, which is often the central question in a premises liability claim.

2. A Snow Removal Contract That Protects You

If you hire a contractor, the contract matters as much as the plow. Require the contractor to carry general liability and auto coverage, name your business as an additional insured, and agree to indemnify you for losses caused by their work. Collect a current certificate of insurance before the season starts, and spell out response times and service standards in writing. Watch for contracts that require service only after a set accumulation, which can leave light ice untreated.

3. Records of Every Plowing, Salting, and Inspection

Slip-and-fall claims are often filed months after the incident, when memories have faded. A simple log with the date, time, conditions, and action taken can be the most persuasive evidence you have. Ask your contractor for service records, and keep photos from walk-throughs on stormy days. Digital logs with time stamps, such as a shared spreadsheet or a photo app, are easy to maintain and hard to dispute.

4. Attention to Entrances and Refreeze Spots

Most winter falls happen in a handful of predictable places: entrances, ramps, stairs, and spots where melting snow refreezes overnight. Use absorbent entrance mats, keep lighting working in parking areas, and check gutters and downspouts that drain onto walkways. Post wet floor signs during storms and assign someone to check entry floors every hour on busy days. OSHA’s walking-working surfaces guidance covers the employer side of these hazards.

5. Clarity on Who Is Responsible in Leased Space

Tenants and landlords often assume the other party handles snow removal. Read your lease. It may assign responsibility for sidewalks, lots, and common areas, and it may require you to carry specific limits or name the landlord as an additional insured. Resolve any gaps now, before a claim forces the question. If you share a building, ask the property manager for their snow removal contract and certificate as well.

6. An Incident Response Routine

When someone falls, the first hour matters. Train staff to help the injured person, call for medical care if needed, photograph the area, collect witness names, and complete an incident report that sticks to the facts without admitting fault. Report the incident to your insurer promptly, because late notice can complicate a claim. Preserve any security camera footage, since many systems overwrite recordings within days.

7. Limits That Match Today’s Slip-and-Fall Claims

A fall that causes a fracture or head injury can produce a large claim. Review your general liability limits and your umbrella with your broker, and remember that employee falls fall under workers’ compensation. Our commercial insurance team can compare your limits to your exposure, and the Dynamic Risk Synergy Portal offers winter safety and training materials.

Your Pre-Storm Checklist

• Write down your snow and ice plan, with names and triggers.
• Get a current certificate and additional insured endorsement from your snow removal contractor.
• Start a plowing and salting log today.
• Place entrance mats and check lighting and downspouts.
• Confirm snow removal responsibilities in your lease.
• Train staff on the incident response routine.
• Review general liability and umbrella limits before renewal.