How to Handle Your Workers’ Comp and General Liability Insurance Audits with Less Stress
- Adam Overmyer
- Jul 27
- 5 min read
And Why Pay-As-You-Go Could Save Your Business Time, Money, and Headaches
Running a small or medium-sized business in New Jersey comes with a long checklist of responsibilities—keeping your customers happy, managing employees, staying on top of your finances… and then, suddenly, your insurance company sends you an audit notice.
If you've ever opened one of those letters and felt a sinking feeling in your stomach, you’re not alone.
At The Overmyer Insurance Agency, we work with countless NJ businesses every year who are caught off guard by their workers’ comp or general liability insurance audits. Whether you're a coffee shop in Cranford, a contractor in Westfield, a distributor in Newark, or a boutique in Asbury Park, this guide is for you.
Here’s what you need to know to handle your audits smoothly, avoid surprise bills, and set your business up for long-term success with tools like pay-as-you-go workers comp.
What Is an Insurance Audit?
Let’s start with the basics.
A workers’ compensation or general liability insurance audit is how your insurance company makes sure you’re paying the right amount for your coverage—based on actual business activity, not just estimates.
You’ll typically be audited:
Annually, around your policy’s expiration or renewal date
By phone, email, mail, or in-person (depending on the carrier)
For information such as payroll, number of employees, job roles, subcontractor payments, gross revenue, and business classification
These audits aren’t optional—they’re built into your insurance contract. But with the right preparation, they don’t have to be stressful.
Why Small Businesses Get Hit With Big Surprise Bills
Let’s say you estimated your annual payroll to be $150,000 when you bought your workers comp policy. But by the end of the year, business is booming and your payroll actually hit $220,000.
That $70,000 difference? The carrier will bill you retroactively for that additional premium—sometimes thousands of dollars—as part of your audit.
This same logic applies to general liability policies based on sales, business classification, building square footage, or subcontractor costs.
At The Overmyer Insurance Agency, we’ve seen this happen many times—business owners are busy growing their companies and forget to notify their agent or carrier of changes. Then the audit bill hits like a freight train.
How to Prepare for Your Audit the Right Way
Whether it’s your first time being audited or your tenth, here’s a checklist to keep things organized and stress-free:
1. Keep Accurate Payroll Records
Your workers comp audit will ask for:
Payroll by employee (and job classification)
941s, 940s, W-2s, W-3s
Certificates of insurance for subcontractors
Independent contractor payments (1099s)
2. Track Gross Sales and Receipts
General liability audits may be based on:
Gross sales
Total receipts
Square footage of your operations
3. Separate Job Classifications Clearly
An office admin and a roofer don’t carry the same level of risk. Be sure to:
Break out payroll by classification
Document what each employee does
Misclassifying employees can lead to overpaying on your premium—or worse, a claim being denied.
4. Work with Your Insurance Agent
Your agent should be your first call. At The Overmyer Insurance Agency, we review your original estimates and make sure your records match what your policy was based on. If there’s a mismatch, we can help you respond before you get overcharged.
What Happens If You Don’t Comply?
Ignoring an audit isn’t an option.
If you fail to provide records or don’t respond, your carrier may:
Estimate your exposure—often on the high side
Non-renew your policy
Send your balance to collections
Report a lapse in coverage
That can lead to regulatory penalties in NJ, especially for workers comp, which is required by law for any business with employees.
The Best Way to Avoid Audit Surprises: Pay-As-You-Go Workers’ Comp
This is where pay-as-you-go workers comp comes in—and it’s a game changer for growing businesses. In fact, we always recommend pay-as-you-go workers comp to all of our clients to help improve audit accuracy.
What Is Pay-As-You-Go Workers Comp?
Instead of estimating your payroll once a year and facing a big adjustment later, pay-as-you-go billing connects directly to your payroll provider.
That means:
Premiums are calculated in real-time, based on actual payroll
No big surprises at audit time
Smoother cash flow for your business
Often no large upfront deposits
It’s perfect for:
Seasonal businesses
Companies with fluctuating staff
Growing businesses adding employees during the year
At The Overmyer Insurance Agency, we help clients set up pay-as-you-go workers comp through trusted payroll partners or even through your existing payroll provider like Counterpoint, Workplace HSM, or ADP, or Paychex.
Need to Fix a Past Audit? Here's What to Do
If you've already received an audit bill that doesn’t look right:
Call your agent immediately. We are here to help and can help identify any misclassified payroll, missing certificates of insurance for subcontractors, or overestimated exposure.
Request an audit dispute or re-review. Carriers do make mistakes—and they have formal processes to review disputes.
Provide documentation quickly. The faster you respond with the documents to support your dispute, the better your chance of a favorable resolution.
Final Tips for Staying Ahead of Future Audits
Communicate changes in payroll or sales with your agent throughout the year
Set calendar reminders for when audits are typically due
Organize your employee records and certificates of insurance for subs
Ask about payroll integration when renewing or switching policies
Schedule an annual insurance review with your agent
Need Help With Your Business Insurance Audit?
At The Overmyer Insurance Agency, we specialize in helping small and medium-sized businesses in NJ manage their workers comp, general liability, and commercial insurance needs—with less stress.
Whether you’re:
Trying to make sense of your audit bill
Curious about pay-as-you-go billing
Or ready to get a competitive quote for your coverage
We’re here to help.
Call us at (908) 476-8685 or request a quote at www.oianow.com
Let’s make your next audit one less thing to worry about.
Frequently Asked Questions About Insurance Audits for NJ Business Owners
What is a workers comp insurance audit?
A workers compensation insurance audit is a review conducted by your insurance company to verify your actual payroll and employee classifications over the policy term. It's used to adjust your premium based on real exposure, not just estimates you gave at the start of the policy.
Why am I getting a general liability audit?
General liability policies are often rated based on your business’s revenue, square footage, or subcontractor expenses. Insurance companies audit these numbers to ensure you're being billed appropriately for the level of risk your business presents.
Can I be penalized for incorrect estimates?
Yes. If your actual payroll or sales are higher than what was originally estimated, your carrier will send a bill for the additional premium. If you underestimated significantly, it could result in a large, unexpected audit balance.
What happens if I ignore the audit request?
If you fail to comply, your insurance company may estimate your exposure—usually on the high end—send the bill to collections, or even cancel or non-renew your policy. For workers comp, noncompliance can also result in state penalties.
How can I avoid surprise audit bills?
The best way is to:
Keep accurate and updated payroll records
Communicate any business changes to your agent
Switch to pay-as-you-go workers comp, which calculates premiums based on actual payroll each pay cycle
What is pay-as-you-go workers comp?
Pay-as-you-go is a billing option that integrates your workers comp policy with your payroll provider. Instead of paying based on an estimate, you pay based on your actual payroll as you go—minimizing audit adjustments and improving cash flow.
Can I dispute an audit?
Yes. If you believe your audit results are inaccurate, you can request a formal review. Your insurance agent can help gather documentation and submit a dispute to the carrier on your behalf.
Does my business qualify for pay-as-you-go workers comp?
Most small to medium-sized businesses do, especially if you use a payroll provider like ADP, Gusto, or QuickBooks. At The Overmyer Insurance Agency, we’ll help you determine if your current carrier or payroll system supports it—and help you make the switch.
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