Glossary
Earned premium
The share of a policy's premium that matches the coverage period already elapsed, which an insurer can book as revenue and keep if the policy ends early.
Also called: premium earned, earned premiums
Premium buys a period of protection, and the insurer treats it as revenue only as that protection is delivered. The part that matches the time that has passed is earned. The rest is unearned and, on a mid-term cancellation, is generally what gets refunded. For a straight annual policy, earned premium is written premium x days elapsed / days in the term.
Say a $12,000 annual policy has been in force 90 days of 365 (a hypothetical). Earned premium is $12,000 x 90 / 365, about $2,959, and $9,041 is unearned. A pro rata cancellation at that point refunds the $9,041. A short-rate cancellation keeps a penalty, and a minimum earned premium clause can keep more.
The figure matters beyond cancellations. Insurers divide losses by earned, not written, premium to get the loss ratio, and the combined ratio is built on the same base, so a fast-growing insurer's written premium can run well ahead of what its results reflect. A premium audit can also change it: if your payroll or sales finished above the estimate, the audit adds earned premium.
the combined ratio: how insurers make (and lose) money on underwriting shows how insurers use it, premium audits: how they work and how to prepare covers the after-the-fact adjustment, and written premium defines the starting figure.
Last reviewed October 10, 2026