Which term is defined as the portion of written premium that has not yet been earned?

Which term is defined as the portion of written premium that has not yet been earned?

• A. Written premium
• B. Earned premium
• C. Unearned premium
• D. Premium reserve

Answer: (C)

At any point, premiums are earned as the insurance coverage is provided over time. The portion of written premium that hasn’t yet been earned represents protection still in force but not yet paid for by the policy period. This amount is recorded as unearned premium (a liability on the insurer’s books) and it decreases as time passes and more of the policy term is fulfilled, turning into earned premium. For example, a one-year policy with a $1,200 premium would have $100 earned each month and $1,100 remaining as unearned premium after the first month. So, the term for the portion not yet earned is unearned premium. Written premium is the total rent charged for policies written, earned premium is the portion already recognized as revenue, and premium reserve isn’t the standard term for the unearned portion.

At any point, premiums are earned as the insurance coverage is provided over time. The portion of written premium that hasn’t yet been earned represents protection still in force but not yet paid for by the policy period. This amount is recorded as unearned premium (a liability on the insurer’s books) and it decreases as time passes and more of the policy term is fulfilled, turning into earned premium. For example, a one-year policy with a $1,200 premium would have $100 earned each month and $1,100 remaining as unearned premium after the first month.

So, the term for the portion not yet earned is unearned premium. Written premium is the total rent charged for policies written, earned premium is the portion already recognized as revenue, and premium reserve isn’t the standard term for the unearned portion.