What to Do When a Workers' Comp Audit Reveals You Owe a Lot of Money

Fill out fewer forms, and be covered from the beginning.

Workers' compensation is just one of a long line of tasks on many business to-do lists. Unfortunately, unlike getting caught up on the filing or changing your address on a website, the longer you let your workers' comp obligations sit, the more money you're going to owe. So what should you do when all of a sudden, the bill comes due? We asked Pablo Conde, an expert with nearly four decades of insurance experience, what you should do.

When The Bill Comes Due

Conde's first point? You'll probably know when you're about to see a massive bill in the mail. Audits rarely strike out of nowhere, as Conde told us. "Most of the time, they're auditing you because they think there's a problem, or they think that you're not in compliance; somebody's made a claim against you or they've gone through the paperwork and can't find your policy." In short, you haven't paid the bill, and somebody's finally noticed.

It varies from state to state how and when the policies are enforced, but sooner or later, if you try to get by unnoticed, you're going to appear on someone's radar, and it is going to cost you. As Conde noted, it's one of the few things you can count on when it comes to workers' compensation coverage: "If you've got four employees and they're not covered, you're going to have to pay for that insurance and also pay any penalties."

What Happens First?

So when you open the envelope and see the total, what's the first thing you should do? According to Conde, call an insurer, and fast, as you'll likely also find a stop work order in that envelope as well: "Depending on your circumstances, you can get WC in a matter of minutes, or it may take a day or two. You want to start that as quickly as you can so you can get back to work."

But there is a limit to what an insurer can do for you; don't expect any sort of retroactive coverage, despite what you may hear or what an agent might promise you. "Nobody's going to backdate your policy for years," Conde explained. "Unfortunately, we have some agents that don't give out clear and precise information, and some people don't understand what they're saying. We deal with those issues on a daily basis."

Not having workers' comp can be a real pain in the neck.

Once you're covered, you can have the stop work order lifted and get your business back on track. But what do you need to do to prevent this in the future?

Get Covered And Stay Covered

"If you're audited once, you're more likely to be audited again," Conde tells us. Especially in states dealing with compliance issues, they're more likely to act and act quickly against businesses they feel are shirking their responsibility, and the more infractions you collect, the harder it will be to get insured. According to Conde, it's simple: "Insurance is always about the risk, so the more violations are on the books, the bigger a risk you're going to be and the more it's going to cost you." Getting worker's compensation now can save you substantially later.