Insurance Acounting query (minimum earned premium policy)
Posted: Tue Nov 11, 2014 11:04 am
Normally earned/unearned premium gets calculated on pro-rata basis.
My question is, if the policy is on short rate or is a minimum earned premium policy; for accounting purpose will the earned premium still be calculated on pro-rata?
In other words, let’s say for a 100% minimum earned policy (annual) with a premium of 1,200$; the complete premium is earned on the policy issuance date itself. So for accounting purposes, will the complete 1,200$ be considered as earned in the next accounting period after the policy issuance or will it be 100$ (considering monthly accounting period)?
Thanks.....
My question is, if the policy is on short rate or is a minimum earned premium policy; for accounting purpose will the earned premium still be calculated on pro-rata?
In other words, let’s say for a 100% minimum earned policy (annual) with a premium of 1,200$; the complete premium is earned on the policy issuance date itself. So for accounting purposes, will the complete 1,200$ be considered as earned in the next accounting period after the policy issuance or will it be 100$ (considering monthly accounting period)?
Thanks.....