Non-compliance charge

Also called audit non-compliance penalty

A non-compliance charge is an additional amount many states permit a carrier to add when an insured fails to cooperate with a premium audit, applied on top of the estimated premium.

The charge is separate from the estimated premium itself. It exists so that ignoring an audit costs more than completing one, and it is typically expressed as a percentage of the policy's estimated annual premium.

Whether the charge is available, and how large it can be, is set by state rule.

Why it matters at audit

Failure to complete an audit is also grounds for cancellation or non-renewal in most states, which follows a business to its next carrier and is usually the more expensive consequence.

Related terms

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