What are Audit Premiums? - Insurance Navy. Audit Premiums refer to the additional premium amounts an insurance company may charge after auditing an insured’s policy. This typically occurs in policies where the premium is based on fluctuating variables such as sales, payroll, or inventory levels. At the policy’s inception, the insured estimates these variables, and the initial premium is calculated based on this estimate. However, the actual values may vary throughout the policy period.
Therefore, the insurance company conducts an audit, usually at the end of the policy period, to determine the actual values. If the audit reveals that the actual values were higher than the estimated ones, the insured may have been under-insured during the policy period. The purpose of the audit premium is to ensure that the premium charged corresponds with the risk borne by the insurance company.