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
Methods for payment of the value of a policy. An insurance company can select one of three options in settlement of a loss: make a cash payment; take possession of damaged or destroyed ...
Smallest acceptable premium for which an insurance company will write a policy. This minimum charge is necessary to cover fixed expenses in placing the policy on the books. ...
U.S. government agency (formerly the Atomic Energy Commission) responsible for regulating the nuclear energy industry. The commission also provides supplemental insurance for nuclear ...
Same as term Convertible Term Life Insurance: coverage that can be converted into permanent insurance regardless of an insured's physical condition and without a medical examination. The ...
The term pro rata cancellation comes from the Latin term pro rata, which means in proportion or according to a certain rate. The term pro rata cancellation is used in the insurance business ...
Projections of future accidental losses based on analyses of historical loss patterns. A projected loss picture is used to determine the pure cost of protection and the resultant basic ...
Association of independent agents whose objective is to further the interests of these agents through education, lobbying, and professional ethics. ...
Relinquishment of rights in an insurance policy or pension plan. For example, by withdrawing contributions to a pension plan, an employee forfeits future retirement benefits under that plan. ...
Coverage for damage or destruction of property due to a crime, and property lost due to a burglary, whether successful or attempted. An endorsement provides coverage for robbery and theft ...
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