Quick Answer: Most Texas general liability policies are auditable. The premium you paid at the start was a deposit usually based on estimated payroll, sales or units sold. After the policy ends, the insurer checks your actual numbers. If they came in higher, you may owe more premium. If lower, you may get money back. Many insurers count uninsured subcontractors as your own payroll.

What this article covers

• Why your premium was only an estimate

• What the auditor looks at

• The subcontractor trap

• Owe more, or get money back?

• How to get ready before your policy ends

• If the audit looks wrong

• Frequently asked questions

A remodeling contractor in Pasadena had a great year. He added a crew in March, took on two commercial jobs, and paid a few helpers in cash and by Zelle when the schedule got tight. His general liability policy renewed on time and he never thought about it again.

Six weeks after it ended, a letter arrived asking for his payroll records, his 1099s and certificates of insurance for every subcontractor he used. A month after that came a bill for additional premium, bigger than he expected.

Nothing went wrong with his policy. It worked exactly the way it was written. He just did not know that the price he paid in January was a guess.

Key Takeaways

• Most general liability policies are auditable. The Texas Department of Insurance says the premium paid at the start "is a deposit (estimated) premium."

• The estimate is usually based on payroll, sales or units sold, depending on what your business does.

• The insurer has the right to check your books, usually after the policy ends, sometimes during it.

• Higher actual numbers can mean an additional premium. Lower numbers can mean a refund.

• Many insurers count subcontractors without proof of insurance as your own payroll, which is where many surprise bills come from.

• A good estimate at renewal and clean records all year are the two things that keep the audit boring.

Why your premium was only an estimate

TDI explains it plainly on its commercial general liability page: "Most CGL policies are auditable policies and contain a condition commonly called 'Premium Audit.'" It goes on: "The premium that is paid at the inception of the policy is a deposit (estimated) premium. Auditable policies usually use estimated payroll, sales, or units sold as the premium base to calculate the deposit (estimated) premium."

In other words, the insurer priced your policy on numbers you gave it before the year happened. The audit is how it finds out what actually happened.

TDI says the base is "usually" payroll, sales or units sold. Which one applies depends on your trade, and the table below is a common pattern, not a rule.

If you are not sure what your policy even covers, start with what general liability covers for a business and whether general liability is required in Texas for your work.

If your business grew this year, expect the audit to notice. That is not a penalty. You are paying for the larger exposure you actually had, the same way you would have if you had estimated it correctly at the start. We cover how the starting price is built in general liability insurance cost in Houston for 2026.

What the auditor looks at

TDI says "the insurer is entitled to examine your books and records to determine whether the actual payroll, sales, or units sold are greater or less than what was estimated. This is usually done after the expiration of the policy, but may also be done during the policy period."

Audits come in three shapes: a form you fill out yourself and mail or upload, a remote audit where you send records electronically, or a physical audit where an auditor visits. The records requested depend on how your policy is rated. TDI does not publish a document list. One national insurer's premium audit FAQ gives its own list, so treat this as what to be ready to show, and ask how your insurer handles it:

The same FAQ notes that bonuses, vacation, sick and holiday pay are generally counted as payroll, and that discounts are generally not subtracted from gross sales. Those details vary by insurer and by state, so ask before you assume.

Get a free general liability audit check or call (281) 833-6755. Hablamos Español.

The subcontractor trap

This is where most surprise audit bills start, especially for Houston contractors.

The insurer's FAQ puts it directly: for general liability, subcontractors who are uninsured or underinsured "are treated as employees and will be included under the appropriate payroll classification." Even insured subs add exposure, because using any subcontractor creates what the insurer calls vicarious liability, usually rated on the total cost of the subcontracted work.

So the fix is not complicated, it is just constant: collect a certificate of insurance from every sub before they start, and keep it on file with the dates. We explain what a certificate actually proves in certificate holder vs additional insured in Texas, how to get your own fast in same day certificates of insurance in Houston, and how 1099 workers fit in 1099 contractors and general liability in Texas.

Workers compensation has its own audit and its own rules for subs. You can request a workers compensation quote alongside your general liability review. Texas Labor Code Section 406.002 says that, except for public employers and as otherwise provided by law, "an employer may elect to obtain workers' compensation insurance coverage." If you chose not to, read the Texas non subscriber rules before you hire. If your general liability policy is rated on payroll, those wages usually still count in its audit.

Owe more, or get money back?

TDI again: "If the actual payroll, sales, or units sold is greater than was estimated, you may owe additional premium. If the actual payroll, sales or units sold is less than what was estimated, you may be due a return premium."

That is why TDI's advice is simple: "it is important to provide an estimate of the payroll, sales, or units to be sold that is as accurate as possible to avoid having to pay an additional premium." A low estimate does not save money. It only moves the bill to the end of the year, when it is harder to plan for.

The policy gives the insurer the right to see your records. Call us before you ignore the letter.

How to get ready before your policy ends

If your policy ends in December or January, November is the right time to do this. Whatever your renewal date, run the same list in the two months before it.

1. Pull your real numbers for the year so far. Payroll from your quarterly tax filings, or sales from your books. Compare them to the estimate on your declarations page.

2. If you are far off, tell your agent now. Adjusting before the policy ends may spread the cost instead of landing it in one bill.

3. Collect every missing certificate of insurance from subcontractors you used this year, with dates that cover the work.

4. Separate office payroll from field payroll if your records allow it. Office work is often classified differently from field work, especially for workers compensation, but only if the records show it.

5. Give an honest estimate for next year at renewal, including the crew you plan to add.

6. Keep the audit letter on your calendar. Answer it on time, and call your agent before you send anything if a number looks wrong.

Some commercial auto policies can be audited too, depending on how they are rated, which we touch on in commercial auto insurance rates in Houston for 2026. If your contracts require higher limits than your general liability carries, check commercial umbrella contract requirements in Texas at the same time.

If you work alone with no employees, check whether a business owners policy fits better, which we compare in BOP vs general liability with no employees in Texas.

If the audit looks wrong

Audits are done by people, and people misclassify work. If the result looks off, ask for the worksheet showing your exposure and class codes, compare it with your records, and send the insurer the documents that support the correction. Insurers commonly have a process for disputing audit findings, and your agent can help you use it. If you cannot resolve it, the TDI Consumer Help Line is 800-252-3439.

Common errors worth checking: office employees rated as field workers, insured subs counted as uninsured because a certificate was missing from the file, sales tax included in gross sales, and work from another policy period counted in this one.

Frequently asked questions

Q: What is a general liability audit?
It is the insurer checking your actual payroll, sales or units sold after the policy period, to replace the estimate your premium was based on. TDI says most commercial general liability policies are auditable.

Q: Why do I owe more money after my general liability policy ended?
Because your actual payroll, sales or units sold were higher than the estimate your deposit premium was based on. TDI says you may owe additional premium when actual exposure is greater than estimated.

Q: Can a general liability audit give me money back?
Yes. TDI says that if your actual payroll, sales or units sold are less than estimated, you may be due a return premium.

Q: When does the general liability audit happen?
TDI says it is usually done after the policy expires, but it may also be done during the policy period.

Q: Do uninsured subcontractors raise my general liability premium?
Often, yes. Many insurers treat uninsured or underinsured subcontractors as your own employees and include their payments as payroll. Ask how your insurer handles it. Collect a certificate of insurance from every sub before they start work.

Q: What records do I need for a general liability audit?
It depends on how the policy is rated, and it varies by insurer. TDI says the insurer can examine your books and records but does not publish a list. One national insurer asks payroll rated accounts for payroll journals, quarterly payroll tax returns, a profit and loss statement, the general ledger, subcontractor payments and their certificates of insurance, and sales rated accounts for sales journals, the income statement and the annual federal tax return. Be ready to show those.

Q: How do I avoid a big audit bill?
Give the most accurate estimate you can at renewal, tell your agent during the year if your business grows, and keep a current certificate of insurance on file for every subcontractor.

Q: What if I disagree with my audit?
Ask for the audit worksheet, compare it with your records, and send the insurer documents that support a correction. Your agent can help. The TDI Consumer Help Line is 800-252-3439.

Related Articles

• What can cancel your general liability policy in Texas

• 1099 contractors and general liability in Texas

• Certificate holder vs additional insured in Texas

• General liability insurance cost in Houston for 2026

Why AZ Insurance Stands Apart

Most business owners meet their audit as a letter and then a bill. We would rather you see it coming in November. AZ Insurance has served Texas businesses since 2003 from 15 offices across Houston and Dallas, we compare multiple insurance companies rather than defending one, and we will check your estimate against your real numbers, flag the subcontractors missing certificates, and help you answer the audit when it arrives.

Bring us your current general liability declarations page and this year's payroll or sales total, or start a general liability request and see everything we write on our business insurance page. Request a free audit check or call our business line at (281) 833-6755, in English or Spanish.

This article is general information, not legal, tax or accounting advice, and not a promise of coverage. How your premium is audited is governed by your policy and your insurer's rules. If you have questions about an audit you cannot resolve, the TDI Help Line is 800-252-3439.