The Earned Premium Calculator helps insurance professionals and policyholders determine how much of the written premium has been “earned” over a specific period. This is essential for recognizing revenue in insurance accounting and understanding the financial exposure of an insurance provider at any point in time.
This calculator falls under the Insurance Accounting & Financial Reporting Calculator category. It supports actuaries, underwriters, accountants, and financial analysts who manage insurance policies, assess risks, and report financial outcomes.
The tool makes it easy to calculate the portion of a premium that corresponds to the actual coverage provided so far, instead of relying on estimates or manual calculations.
formula of Earned Premium Calculator
The formula to calculate earned premium is:
Earned Premium = Written Premium × (Number of Days Policy Active / Total Policy Term in Days)
Where:
- Written Premium = total premium amount recorded at the start of the policy
- Number of Days Policy Active = days the policy has been active within the reporting period
- Total Policy Term in Days = total duration of the policy (typically 365 days for annual coverage)
This formula ensures that only the premium related to the time the policy was active is considered as earned, which helps in accurate revenue recognition.
Quick Reference Table: Earned Premium by Time Passed
| Days Active | Annual Policy (%) | Semi-Annual Policy (%) | Monthly Policy (%) |
|---|---|---|---|
| 30 | 8.22% | 16.44% | 100% |
| 90 | 24.66% | 49.32% | — |
| 180 | 49.32% | 98.63% | — |
| 365 | 100% | — | — |
Note: Use these percentages as quick estimates. Exact values may vary slightly based on leap years or custom durations.
Example of Earned Premium Calculator
Let’s say an annual auto insurance policy was written with a written premium of $1,200. The policy has been active for 120 days, and the total policy term is 365 days.
Now, apply the formula:
Earned Premium = 1,200 × (120 / 365)
Earned Premium = 1,200 × 0.3288 = $394.56
So, after 120 days, $394.56 of the premium has been earn. This helps the insurer report revenue accurately and allows the customer to see how much value has been delivered.
Most Common FAQs
Earned premium shows how much of the policy’s premium the insurer has actually “earned” by providing coverage. It helps insurance companies track revenue and match income to the service period.
Written Premium is the total amount bill when the policy is issue.
Earned Premium is the portion of that amount corresponding to the time coverage has been provided.
No, earned premium cannot be negative. However, if a policy is cancel and refunded before any days have passed, the earned premium would be zero.