Earned Premium
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Anmol Kaur
‘Earned Premium’ is the portion of premium considered ‘earned’ by the insurance company based on the ratio of time elapsed on the policy to its effective life! Calculating Earned Premium through accounting method:
This method is used to calculate earned premium for majority of corporate income statements of insurers. It involves dividing the total premium by 365 and multiplying the number hence obtained with the number of days elapsed in the policy period.
eg. Earned premium at a time 100 days have elapsed in a policy having an annual premium of $365 would be ((365/365)*100) = $100.
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