Plumbers Insurance Audits: What To Expect and How To Prepare

Annual (or periodic) audits are normal for contractor policies—especially general liability (GL). The carrier compares your estimated exposure (e.g., payroll, sales, subcontracted costs) to what actually occurred and then adjusts the premium accordingly. Done right, audits confirm you’re paying a fair price and carrying the right limits for the work you actually performed. 

What Is a Plumbers (GL) Insurance Audit?

A GL premium audit is a review of your books—payroll, gross receipts (if applicable), subcontractor payments, classifications, and supporting tax forms—to ensure your premium matches real exposure. For contractors like plumbers, GL is typically payroll‑based (some classes use sales). The ISO/industry classification system ties your work type to the proper rating basis, so getting the class right is crucial. 

Why plumbers should care about subs: If you pay subcontractors and can’t produce valid Certificates of Insurance (COIs) for their GL/WC, carriers may treat those costs as your exposure and charge a premium on them at audit. Keep COIs current for the entire period each sub worked. 

Why It Matters

• Fair Premiums. Underestimates result in additional premiums; overestimates can trigger a credit, subject to any minimum & deposit/minimum earned terms in your policy. 
• Adequate Coverage. Audits ensure your coverage remains aligned as crews, jobs, and revenues fluctuate throughout the year. 
• Compliance. Many carriers require audits on GL/WC; non-compliance can result in estimated audits and charges. 

What To Expect

1. Notice & Format. You’ll be contacted shortly after the policy term—often to complete an online, phone, or in‑person audit. 
2. Questionnaire. You’ll receive instructions detailing what to submit (see the next section).
3. Document Review. The auditor verifies “primary” records (payroll/sales registers, ledgers) against “secondary” tax proofs (941/940, W‑2/1099, returns). 
4. Subs & COIs. You’ll be asked for details of subcontractor payments and corresponding COIs for the dates they worked. Missing COIs can increase your auditable exposure. 
5. Results. You will receive an audit summary with adjustments—either an additional premium due or a credit issued (again, subject to any minimums).

Mid-term changes: If operations change materially (e.g., larger payroll, new states), advise your agent—carriers can endorse mid-term or even conduct interim reviews to keep things accurate. 

The Records Plumbers Should Keep Year‑Round

Have these ready and current:

• Payroll reports with role descriptions and work statuses; overtime is broken out. Tax proofs (941/940, W‑2/1099, 1120/1065/Schedule C). 
• Sales/gross receipts (if your class is sales‑based). 
• Subcontractor ledger with project dates, scope, dollars paid, material splits, and COIs for GL and WC covering the entire period of work. 
• General ledger: cash disbursements, check registers. 
• Classification notes: document who does field vs. office work; accurate classing avoids paying the higher rate when records aren’t split. 

Pro Tips to Be Audit‑Ready (and Minimize Extra Premium)

• Create an “Audit” folder. Save payroll, tax proofs, sub ledgers, and COIs to a year‑specific drive/folder as you go. 
• Chase COIs before subs start. Collect at onboarding and quarterly thereafter, so coverage spans the entire work period. (Many builders require this cadence.) 
• Split clerical vs. field payroll. If records aren’t maintained, rating rules can push all wages into the highest‑rated class. 
• Confirm your class codes. GL premiums hinge on classification and exposure; misclassifying plumbing work (or adding new operations) can skew the rate and audit. 
• Know your policy math. Ask your broker if a minimum earned or minimum & deposit applies—this affects how much credit you can receive if actuals come in lower. 
• Communicate changes early. New services, hiring surge, or out‑of‑state work? Tell your agent now, not after the audit. 

After the Audit: Review & Respond

• Check the worksheet. Ensure that payroll, subs, and class codes are accurate; request the auditor’s worksheet if anything appears incorrect and dispute discrepancies with supporting documentation. 
• Plan cash flow. Additional premiums are usually billed after the audit; credits may apply if allowed under your policy’s minimums. 
• Tighten next year’s estimates. Use this audit’s actuals to set realistic exposures for the new term.

Frequently Asked Questions

Are all plumber policies audited?

Not all, but GL and WC are commonly subject to audit, and many carriers audit “most business policies.” Check your policy’s Conditions. 

What counts as “payroll” or “sales” for GL?

Auditors rely on primary payroll/sales reports and verify them with tax forms. Contractors are often payroll-based, while some classes are sales-based—carriers even provide separate forms for each type. 

Do I really have to collect COIs from subs?

Yes. Without valid COIs (GL and usually WC) for the periods subs worked, their costs can be charged against your policy at audit. Keep copies that match the dates of work. 

Can I get money back if I overestimated?

Often, yes—but minimum & deposit/minimum earned provisions may limit refunds. Ask your broker to explain any minimums on your policy. 

Who performs the audit, and how long does it take?

Insurers use in‑house teams and outside vendors. Many audits are completed shortly after the policy ends, with online options available to expedite the process. 

Bottom Line for Plumbing Contractors

Treat the audit like routine maintenance: keep clean records, collect COIs, confirm classification, and tell your agent about changes during the year. You’ll minimize surprises, stay compliant, and pay closer to the true cost of your risk—no more, no less. 

Want an audit‑ready policy package? Talk to Plumbers Insurance US about contractor‑specific GL, tools & equipment, auto, workers’ comp, and (when needed) CPL/E&O—built to your exact scope and state requirements.