cancellation of a binder by insured and minimum earned premium

There is also a lot of administrative work that goes on behind the scenes to get a policy issued. The insurance companies have minimum earned premiums to discourage policyholders from buying an annual policy when they only need coverage for a short-term project or event. This is commonly seen on builder’s risk and liability policies for construction projects. In this case, there is no benefit or reason to cancel the policy prior to the expiration date. This means you can cancel the policy early, but will be on the hook for paying the full premium anyway. Some policies are subject to a 100% minimum earned premium. Please be aware that most state taxes and filing fees cannot be pro-rated or refunded after the policy is issued. What do minimum earned premiums apply to? If your policy is subject to this, the early cancellation may not result in a straight pro-rate of the earned premium.įor example, a 50% minimum earned premium means you are responsible for paying half of the total premium regardless of when the policy actually cancels-even if coverage was only in place for a week.

Some policies are subject to a minimum earned premium percentage upon cancellation.Ĭommon minimum earned premiums are 25%, 50%, and 100% of the total premium. So what does “minimum earned premium” mean? On July 1 (exactly 6 months later), the earned premium is $500. Earned premium is the amount of premium that the insurance company has earned on your policy as of any given date.įor example, on January 1, you may purchase an annual insurance policy that costs $1,000. The insurance company will typically pro-rate the amount of money owed based on the number of days the policy was active. If the policy is no longer needed, it can be canceled at any time.

12 months is standard for commercial insurance policies. Most insurance policies are issued on an annual term. There are many reasons a business may want to cancel their policy prior to the expiration date, but no matter the reason, a policy holder can cancel the policy at any time. Business liability insurance insurance policy Insurance Premoium Liability Insurance Minimum Earned Premium

Cancellation of a binder by insured and minimum earned premium