Unearned Premium


Unearned Premium
The premium corresponding to the time period remaining on an insurance policy. Unearned premiums are proportionate to the unexpired portion of the risk, for which coverage has been sought by the insured party. Thus, it is deemed to have not yet been earned, or "unearned," by the insurer. It appears as a liability on the insurer's balance sheet, as it would have to be paid back upon cancellation of the insurance policy.

For example, assume an insurer writes a five-year insurance policy that is fully prepaid by the insured party. Insurance premiums paid are $2,000 per year, for a total of $10,000 for the five-year period. At the end of the first year, the insurer would have earned a premium of $2,000 and would have an unearned premium of $8,000.


Investment dictionary. . 2012.

Look at other dictionaries:

  • unearned premium — n. Insurance, portion collected that must be returned to insured if policy is cancelled. Webster s New World Law Dictionary. Susan Ellis Wild. 2000 …   Law dictionary

  • unearned premium — An insurance premium or part of such premium to which the insurance company is not entitled because of not having carried the risk. That portion of the premium paid by a borrower to a building and loan association which is proportionate to the… …   Ballentine's law dictionary

  • unearned premium — noun : the share of a total insurance premium applicable to the unexpired portion of a policy term …   Useful english dictionary

  • unearned premium reserve — see reserve Merriam Webster’s Dictionary of Law. Merriam Webster. 1996 …   Law dictionary

  • unearned premium reserve — A reserve required by modern statutes of insurance companies to assure the return of unearned premiums. 29 Am J Rev ed Ins § 56. A reserve which comes into being as the natural result of collecting premiums in advance for insurance to extend over …   Ballentine's law dictionary

  • unearned premium reserve — noun : a reserve established at the end of any accounting period in insurance to represent premiums paid in advance for which protection is to be given in the future …   Useful english dictionary

  • premium — A reward for an act done. Brown v. Board of Police Com rs of City of Los Angeles, 58 Cal.App.2d 473, 136 P.2d 617, 619. See also bonus A bounty or bonus; a consideration given to invite a loan or a bargain, as the consideration paid to the… …   Black's law dictionary

  • premium reserve — See unearned premium reserve …   Ballentine's law dictionary

  • premium, unearned — n. Insurance, portion collected that must be returned to insured if policy is cancelled. Webster s New World Law Dictionary. Susan Ellis Wild. 2000 …   Law dictionary

  • Earned premium — is the portion of an insurance written premium which is considered earned by the insurer, based on the part of the policy period that the insurance has been in effect, and during which the insurer has been exposed to loss. For instance, if a 365… …   Wikipedia


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