Insurance Glossary

Insurance Term - Net Premiums Earned

The adjustment of net premiums written for the increase or decrease of the company’s liability for unearned premiums during the year is known as Net Premiums Earned. When an insurance company’s business increases from year to year, the earned premiums will usually be less than the written premiums. With the increased volume, the premiums are considered fully paid up at the inception of the policy, so that, at the end of a calendar period, the company must set up premiums representing the unexpired terms of the policies. On a decreasing volume, the reverse is true.

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