Premium Audit
When you place your business with New Mexico Mutual, we consider business operation classifications and payroll estimates to determine an estimated premium of what you owe for your insurance coverage. Your premium is the cost of the insurance as outlined by your policy.
When the policy period ends, we conduct a summary report (or audit) of the operations you actually conducted during the policy period to determine what your actual final premium is versus the estimated amount. New Mexico Mutual is contractually obligated to perform a final premium audit on every policy and our customers are required to cooperate and provide the necessary information needed to calculate the actual premium.
We employ two types of audit methods to help calculate your company’s payroll premium: self-audit questionnaires and a personal visit by one of our staff auditors.
Self-audit questionnaires are mailed to you to complete and return with the appropriate requested information. The questionnaires are sent the day your policy ends and allow you thirty days to complete and return.
Personal visits to a company are known as physical audits and involve a New Mexico Mutual staff auditor conducting an on-site review of business operations and employee payroll to make an accurate assessment of the final actual premium.
Verifiable records needed for your audit
- Federal tax returns
- IRS Form 941s or New Mexico SUTAs
- Cancelled checks and bank statements
- General ledgers
- Cash disbursement journals
- Books of original entry (including source documents)
- Job contracts and/or invoices
- Certificates of insurance for sub-contractors (if applicable)
- Payroll records including overtime in dollars, hours, totaled by employee per pay period, and summarized by class code in order to receive credit for excess overtime pay (payroll paid in excess of the regular rate of pay)
- Job descriptions detailing each employee’s duties
- Written contracts
- Executive officer payrolls and descriptions of their duties (even if the officers have elected to be excluded from state workers’ compensation coverage)
- Brochures or promotional items that offer a comprehensive description of your business operations, including your products and/or services
Good record keeping can help reduce your workers’ compensation premium significantly.
- Overtime earnings – The most common way to reduce your insurance cost is to differentiate overtime earnings in your records to separate straight time and premium time. For instance, the half-time portion of ‘time and one-half’ for overtime wages is not included in calculating your premium
- Tip wages – Employee tip wages will not be included when they are separated from your employee’s regular wages.
- Correct classification(s) – Use correct classification(s) to describe your business, as sometimes there are lower cost classifications available to you. Determining correct business classifications can be complicated and our premium audit professionals can help you understand this process.
- Learn more – There are also other record keeping methods that you can use to lower your premium costs. New Mexico Mutual provides these tips and other premium audit information, call Premium Audit Department at: 505-343-2825 or 505-343-7720
