Earned premiums represent what?

Earned premiums represent what?

• A. The portion of written premiums that apply to the part of the policy period that has already occurred
• B. The total premium expected to be charged for renewal
• C. The portion of premiums that remains unearned until policy cancels
• D. The entire written premiums for the year

Answer: (A)

Earned premiums are the portion of the written premium that has already been "used up" by the portion of the policy period that has occurred. In other words, as time passes, part of the premium is recognized as revenue because the insurer has provided coverage for that time. For example, a 12-month policy with a $1,200 premium earns $100 each month; after three months, $300 is earned and $900 remains unearned. This contrasts with unearned premium, which is the portion not yet earned and acts as a liability until it becomes earned. The other options describe renewal projections, total anticipated renewal premiums, or the entire year’s written premium, none of which reflect the actual amount of premium earned during the policy term.

Earned premiums are the portion of the written premium that has already been "used up" by the portion of the policy period that has occurred. In other words, as time passes, part of the premium is recognized as revenue because the insurer has provided coverage for that time. For example, a 12-month policy with a $1,200 premium earns $100 each month; after three months, $300 is earned and $900 remains unearned. This contrasts with unearned premium, which is the portion not yet earned and acts as a liability until it becomes earned. The other options describe renewal projections, total anticipated renewal premiums, or the entire year’s written premium, none of which reflect the actual amount of premium earned during the policy term.