What is the earned premium in insurance terms?

Earned premium refers to the portion of the insurance premium that corresponds to the time during which coverage has been provided. It is recognized as "earned" when the insurer has fulfilled its obligation of coverage for the duration that has already passed, meaning the coverage period outlined in the policy is underway.

Thus, once a policy is in effect, each day that passes contributes to the earned premium until the policy expires. At the end of the coverage period, the entirety of the premium is considered earned, as the insurer has had the opportunity to provide protection that the policyholder has paid for. Essentially, until the policy duration is complete, the premium earned reflects the insurer's responsibility for risk during that time.

This distinguishes it from other concepts in insurance. For example, refundable premiums would not align with the idea of earned premiums as they relate to coverage already provided. Similarly, collecting the full premium at the start does not equate to it being earned until coverage has been given. Lastly, ongoing premiums during the term, while they may be part of the policy, denote payments rather than an assessment of what qualifies as earned.