Definition

• Written premium is the amount of premium recorded for a policy at the time it is issued.
  
  

Purpose

• The purpose of written premium is to construct a clear picture of how much the insurance company will earn from a policy at the end of the policy term.
  
  

Earned Written Premium

• Part of a policy's written premium is expressed as earned premium. This is the part of the premium that corresponds with the expired portion of the policy-the amount of coverage the policyholder has already used.
  
  

Unearned Written Premium

• The part of the policy coverage that has not yet expired corresponds with unearned premium. In most cases, the unearned premium has been paid for, but has not yet been used.
  
  

Policy Cancellation

• If the policyholder cancels the policy before its expiration, the unearned written premium is typically returned to the policyholder, less a cancellation fee. This fee can be a flat assessment or a percentage of the unearned premium.