Unearned Premium Reserve
Fund that contains the portion of the premium that has been paid in advance for insurance that has not yet been provided. For example, if a business pays an annual premium of $1000 on January 1, the money is not earned by the insurer until the insurance coverage has been provided. On July 1, $500 would have been earned and $500 would remain as unearned premium, belonging to the policyholder. If either party cancels the contract, the insurer must have the unearned premium ready to refund. For this reason, insurance regulators require that insurers maintain an unearned premium reserve so that, in the event an insurer must be liquidated, there is enough money to pay claims and refund the unearned premium. Because computations for individual policies would be cumbersome, regulators have devised formulas for figuring unearned premium reserves.
Popular Insurance Terms
Method of premium payment under which a temporary premium is charged based on projected loss experience. At the end of the year this premium is adjusted to reflect the actual loss ...
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Deductible eliminated through the payment of an additional premium, resulting in first-dollar coverage under the policy. ...
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Number of individuals exposed to the risk of illness, sickness, and disease at each age, and the actual number of individuals who incurred an illness, sickness, and disease at each age. ...
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Same as term Fortuitous Loss: loss occurring by accident or chance, not by anyone's intention. Insurance policies provide coverage against losses that occur only on a chance basis, where ...
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