Glossary
Return Premium
Premium refunded to an insured when a policy is cancelled mid-term or an endorsement reduces the exposure.
A return premium arises whenever the premium already charged exceeds what the policy ultimately warranted: a cancellation, a downward endorsement, or an audit that found less exposure than estimated. The carrier refunds the difference, usually pro rata.
Return premiums flow through reconciliation as negative amounts on both sides — negative premium and negative commission. Systems that store these as positive numbers with a separate 'credit' flag are a common source of reconciliation errors, because the sign convention silently differs between the agency's records and the carrier's statement.
See also
- Unearned Premium — The portion of a policy's premium covering the remainder of the term — not yet earned by the insurer and refundable if t…
- Chargeback — A reversal of a previously paid commission, typically because a policy was canceled, downgraded, or the premium was retu…
- Premium Reconciliation — The process of matching the premiums collected by an insurance agency to the deposits and commission statements received…