Audit Endorsement

What is an Audit Endorsement?

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An endorsement is a form that can change or add to an insurance policy. Audit endorsements apply to policies written based on projected values, such as, projected sales and payroll. An audit endorsement allows the carrier to determine if the original premium was appropriate for the insured’s operations. This endorsement is derived from a survey of the financial records of a person or organization. It is conducted routinely to determine exposures, limits, premiums, and more. Audit endorsements reflect changes when comparing projected vs. actual values. The carrier may audit the policy on a monthly, quarterly, or annual basis.

Understanding Audit Endorsements

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For example, an insured owns a trucking company with a Business Auto policy based on freight volume each month. At the end of the policy term, the carrier will conduct an audit requesting the actual freight volume for the insured. Suppose the insured estimated freight volume at policy inception to be $10,000, but at policy expiration, the freight volume was $15,000. In that case, the carrier will issue an Audit Endorsement based on additional volume in order to collect the additional premium owed. If actuals are less than anticipated, a Return Premium Endorsement may be issued.

 

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