Audit Premium

Most tree service insurance policies — particularly general liability and workers' compensation — are rated on estimated payroll or revenue at the start of the term. At the end of the policy year, the carrier conducts an audit to determine your actual numbers. If your payroll was higher than estimated (maybe you hired extra climbers for storm season), you owe additional premium. If it was lower, you get a refund.

Audit adjustments catch many tree service owners off guard. A company that estimated $400,000 in payroll but actually ran $600,000 could face a five-figure additional premium bill. This is especially common in the tree industry where seasonal demand — hurricanes, ice storms, spring growth — can cause wild swings in workforce size and revenue.

To manage audit risk, report your estimates accurately from the start. It is tempting to lowball your payroll estimate to reduce the upfront premium, but the audit will catch the difference and you will owe it all at once, plus the carrier may charge audit fees. Some businesses prefer to overestimate slightly so the audit results in a return premium rather than a bill.

Prepare for the audit by keeping clean payroll records, segregating payroll by class code (0106 for tree work vs. 0042 for landscaping), and maintaining accurate revenue records by coverage type. Your bookkeeper or accountant should understand the audit process. If you disagree with the audit results, you have the right to dispute — start with your agent, and escalate to the carrier's audit department or your state insurance department if needed.