Insurance audits: This will only hurt a little


November 22, 2019

The office insurance binder: Learn it, live it, love it, even if you don’t really want to. PHOTO: PETE SCHOPEN

The office insurance binder: Learn it, live it, love it, even if you don’t really want to. PHOTO: PETE SCHOPEN

I hate needles. I know I need shots for certain situations. It doesn’t change the fact that when a doctor walks toward me with needle in hand, it reminds me of Orin Scrivello, DDS, in “Little Shop of Horrors.” I tried to give blood a few years ago, but when I saw the needle in my arm, transporting my blood into the vial … I fainted. Judge me if you must. While I’m putting it all out there, I also hate snakes, extreme heights and fleas.

Despite my dislike of the aforementioned items, though, nothing compares to my hatred of getting insurance for my company. Just like a whooping cough shot, I know I need insurance, but writing those monthly checks hurts worse than a root canal.

This year proved to be especially painful, considering what happened with my workers’ compensation insurance plan. Every June, I get audited for the previous 12 months. The insurance underwriters want to make sure companies don’t lie about the number of employees being insured. For example, if I’m paying for 10 people to be insured, but in reality there are 15 people, the insurance company’s liability is higher without reaping the benefits.

Because of this, they check all my records, pay stubs, W-4s, W-2s, W-9s, XYZs, PDQs, etc. If the auditor notices that the actual payroll doesn’t match the projected, she will bill you for the difference. Very rarely does this fall in your favor. In fact, with a growing company like Schopen Pest Solutions, it never falls my way.

Perfect your projections

In the spring of 2018, I hired seven new people. I went from a staff of 12 up to nearly 20 within a two-month period. When I met with my insurance agent, I projected our numbers for July 1, 2018, through June 30, 2019. I thought our payroll would be around $600,000; it ended up being more than $800,000. That kind of discrepancy doesn’t sit well with your insurance agent — or your certified public accountant.

A few years ago, I was audited and my projected payroll didn’t match my end-of-year payroll. Like I said, it rarely does. But I was off by an entire employee: I had hired someone and failed to include him in my calculations. I ended up being audited for several thousand dollars in back payments. I appealed and checked all of the paystubs for my employees. I only had 10 employees at the time, but it still took me a full day.

At the end of the day, I actually proved that the auditor was wrong. He had charged me for overtime and regular pay. Insurance companies can bill you for base rate for all hours worked, but they can’t charge you for the additional overtime. For example, if a tech is being paid $20 per hour, his overtime is $30 per hour. The insurance companies cannot charge you for that additional $10 per hour. It saved me a few hundred dollars.

Fast forward to 2019, when my accountant, my banker and my insurance auditor all came up with the same figures. Oops! The insurance company wanted a check — on top of my current premiums — for $21,071, or they were going to cancel my policy. In Illinois, you must have workers’ compensation insurance to operate a business. With the addition of seven new employees, a $600,000 building, a new parking lot, new trucks and equipment for my hirees, I didn’t have 21 grand just sitting around. But I negotiated with the insurance provider, and we were able to spread the payments over six months.

Helpful advice

I called my insurance agent, Steve Quist, who is with Mangold Insurance out of Burlington, Wis. I asked him a few questions for this month’s column, although in hindsight, I probably should have been asking a lot of questions before this column.

He told me that when hiring an insurance company, you should be comfortable with your agent. He also said, “You need to understand what you are buying.” Steve always gives me an annual breakdown of costs in my office. His coverage book for my company is longer than John Galt’s speech in “Atlas Shrugged.” But Steve is always very good about taking his time with me and explaining Schopen Pest Solutions’ coverage.

For me, insurance is just like a tetanus shot; you might not like it and it might give you a rash, but it will make you healthier in the long run.


Schopen is owner and founder of Schopen Pest Solutions, McHenry, Ill. You can email him at or reach him via Twitter: @schopenpest; Instagram: @peteschopen; or Facebook: Schopen Pest Solutions, Inc.


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