Glossary
Unearned Premium
The portion of a policy's premium covering the remainder of the term — not yet earned by the insurer and refundable if the policy cancels.
Unearned premium is the mirror image of earned premium. On day one of a policy, the entire premium is unearned; on the last day, none of it is. Insurers carry it as a liability because they would owe it back on cancellation.
For an agency, unearned premium is the basis of return-premium calculations and commission chargebacks. When a policy cancels mid-term, the carrier refunds the unearned premium to the insured and reverses the commission that was paid on it — which is why a cancellation shows up on the commission statement as money going the wrong way.
See also
- Earned Premium — The portion of a policy's premium that corresponds to coverage already provided, recognised proportionally as the policy…
- Return Premium — Premium refunded to an insured when a policy is cancelled mid-term or an endorsement reduces the exposure.
- Chargeback — A reversal of a previously paid commission, typically because a policy was canceled, downgraded, or the premium was retu…