Premium Is The ALIGNED Term Of The Day
It is important to understand the key terms that are used in your insurance policy. Premium for example is a commonly used term, which means the amount of money an insurer charges to provide the coverage described in the policy or bond.
Another term frequently used is Earned Premium, which is the portion of a policy’s premium that applies to the expired portion of the policy. Although insurance premiums are often paid in advance, insurers typically “earn” the premium at an even rate throughout the policy term.
What about the portion of the policy premium that has not yet been “earned” by the company? This is called Unearned Premium because the policy still has some time to run before expiration. A property or casualty insurer must carry all unearned premiums as a liability in its financial statement since, if the policy should be canceled, the insurer would have to pay back a certain part of the original premium. The unearned portion of the premium that has been paid is kept in the “unearned premium reserve.”
So what is the Unearned Premium Reserve? This is the amount of unexpired premiums on policies or contracts as of a certain date (the total annual premium less the amount earned).
To learn more about other key terms used in your insurance policy contact an ALIGNED Insurance Advocate or connect with us at www.alignedinsuranceinc.com today.
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