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
Policy of variable universal life insurance (VUL) under which, if the accumulation of the premiums paid at any point in time (minus policy loans, and withdrawals) equals or exceeds the ...
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Measure of the rate at which policies are cancelled or allowed to lapse. The termination rate is a factor in setting premiums for group life and health policies. ...
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Nominal interest rate minus the rate of inflation. ...
Terms specifying obligations of an insured to keep a policy in force. For example, an insured must pay the premiums due; in life insurance, if death occurs, the beneficiary or the insured's ...
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