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FLA Health, Life And Annuity Practice Exam

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Which term describes the portion of premium that has not yet been earned?
Correct Answer:
Unearned Premium
Explanation:
The concept here is how insurance premiums are recognized over the policy period. When a premium is paid upfront for coverage spanning future days, not all of that money has been earned yet. The portion that hasn’t been used to provide coverage is recorded as a liability called the unearned premium. As time passes and the insurer provides coverage each day, that portion becomes earned premium and is moved from the liability to revenue. The other terms describe different ideas: earned premium is the portion already earned through time, net premium is the amount retained after deductions like reinsurance, and gross premium is the total premium charged before any deductions. So the term for the portion not yet earned is unearned premium.

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