https://www.insurerbrain.com/w/index.php?action=history&feed=atom&title=Definition%3AMinimum_earned_premium 2026-04-29T10:31:53Z Revision history for this page on the wiki MediaWiki 1.43.8 https://www.insurerbrain.com/w/index.php?title=Definition:Minimum_earned_premium&diff=9433&oldid=prev 2026-03-11T05:23:34Z

<p>Bot: Creating new article from JSON</p> <p><b>New page</b></p><div>💰 &#039;&#039;&#039;Minimum earned premium&#039;&#039;&#039; is a contractual provision in an [[Definition:Insurance policy | insurance policy]] that guarantees the [[Definition:Insurance carrier | insurer]] will retain a specified minimum amount of [[Definition:Earned premium | earned premium]] regardless of whether the [[Definition:Policyholder | policyholder]] cancels the policy before its expiration date. Common in [[Definition:Commercial insurance | commercial lines]], [[Definition:Specialty insurance | specialty]], and [[Definition:Surplus lines | surplus lines]] business, this provision protects the carrier from absorbing the fixed costs of [[Definition:Underwriting | underwriting]], policy issuance, and [[Definition:Risk | risk]] assessment when a policyholder walks away shortly after inception.<br /> <br /> 🔄 When a policy includes a minimum earned premium clause, it typically states either a flat dollar amount or a percentage of the annual [[Definition:Premium | premium]] — often 25% to 50% — that the insured owes even if the policy is cancelled on day one. If the policyholder cancels mid-term and the pro-rata earned premium exceeds the stated minimum, the standard earned-premium calculation governs the [[Definition:Return premium | return premium]]. But if the pro-rata amount falls below the minimum, the carrier retains the minimum instead. [[Definition:Insurance broker | Brokers]] negotiating on behalf of their clients should ensure the minimum earned premium terms are clearly disclosed, as disputes can arise when an insured expects a larger refund than the clause permits. The provision is especially prevalent in policies with significant upfront acquisition costs, such as [[Definition:Directors and officers liability insurance (D&amp;O) | D&amp;O]], [[Definition:Cyber insurance | cyber]], and program business placed through [[Definition:Managing general agent (MGA) | MGAs]].<br /> <br /> 📌 Getting this provision right matters for both sides of the transaction. For carriers and MGAs, minimum earned premium clauses stabilize [[Definition:Revenue | revenue]] projections and ensure that the expense of putting a risk on the books is recovered — a concern amplified in lines where [[Definition:Commission | commission]] payments to producing brokers are made at inception. For insureds, the clause represents a financial commitment that should factor into purchasing decisions, particularly for startups or project-specific coverage where the duration of need is uncertain. [[Definition:Reinsurance | Reinsurers]] also pay attention to these provisions, since the [[Definition:Ceding company | ceding company&#039;s]] premium retention practices affect the premium volume flowing into [[Definition:Treaty reinsurance | treaty]] arrangements and, consequently, the reinsurer&#039;s own exposure calculations.<br /> <br /> &#039;&#039;&#039;Related concepts:&#039;&#039;&#039;<br /> {{Div col|colwidth=20em}}<br /> * [[Definition:Earned premium]]<br /> * [[Definition:Return premium]]<br /> * [[Definition:Short-rate cancellation]]<br /> * [[Definition:Pro-rata cancellation]]<br /> * [[Definition:Policy cancellation]]<br /> * [[Definition:Flat cancellation]]<br /> {{Div col end}}</div>

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