Unearned Premium

 

The premium (amount paid to an insurance company) corresponding tot he time prior remaining on the insurance policy.  This amount appears as a liability on the insurer’s  (insurance carrier’s) balance sheet.

Example:  The insured (customer) prepays a five-year insurance policy for $100, or $20 a year.  At the end of the year, the insurer would have earned a premium of $20 and an unearned premium of $80.

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