Earned Premium


Earned Premium
The amount of total premiums collected by an insurance company over a period that have been earned based on the ratio of the time passed on the policies to their effective life. This pro-rated amount of paid-in-advance premiums have been "earned" and now belong to the insurer.

For example, if a $1,000 policy has a two-year life span and no claim has been filed six months into the policy, the company will have an earned premium amount of $250.

There are two different methods for calculating earned premiums, an accounting method and an exposure method. The accounting method is highlighted above and is the more prevalent of the two; the accounting method is also how earned premium is shown on the majority of insurers' corporate income statements. Under the exposure method, earned premiums are calculated based on the percentage of total premium that was exposed to loss during the period being calculated and does not take when the premium was actually collected into account .


Investment dictionary. . 2012.

Look at other dictionaries:

  • 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

  • earned premium — n: the difference between the amount of premium paid by the insured and the amount returned to the insured by the insurer upon cancellation of a policy before its term expires Merriam Webster’s Dictionary of Law. Merriam Webster. 1996 …   Law dictionary

  • earned premium — In insurance, that portion of the premium properly allocable to policy period which has expired. An earned premium is difference between premium paid by insured and portion returnable to him by insurance company on cancellation of policy during… …   Black's law dictionary

  • earned premium — In insurance, that portion of the premium properly allocable to policy period which has expired. An earned premium is difference between premium paid by insured and portion returnable to him by insurance company on cancellation of policy during… …   Black's law dictionary

  • earned premium — See premium earned …   Ballentine's law dictionary

  • earned premium — noun : the pro rata share of a total insurance premium for the expired portion of a policy term …   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 — pre·mi·um / prē mē əm/ n 1: the difference between the face value or par value of a security and its market price when the latter is greater compare discount 2: the price paid for an insurance contract equal to the cost per unit times the number… …   Law dictionary

  • Earned value management — (EVM) is a project management technique for measuring project performance and progress in an objective manner. EVM has the ability to combine measurements of scope, schedule, and cost in a single integrated system. Earned Value Management is… …   Wikipedia

  • premium — premium, prize, award, reward, meed, guerdon, bounty, bonus are comparable when they mean something which is bestowed upon a person as a recompense for cooperation, greater effort, superior merit, or supremacy in competition. Premium is applied… …   New Dictionary of Synonyms


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