Minimum Earned Premium
Key Takeaway
The minimum amount of premium the insurer retains regardless of when the policy is canceled. If a law firm cancels mid-term, the minimum earned premium ensures the carrier keeps a specified percentage, typically 25 to 50 percent of the annual premium, to cover underwriting and administrative costs..
Definition
The minimum amount of premium the insurer retains regardless of when the policy is canceled. If a law firm cancels mid-term, the minimum earned premium ensures the carrier keeps a specified percentage, typically 25 to 50 percent of the annual premium, to cover underwriting and administrative costs.
Why This Matters for Law Firms
Underwriting terms determine what you pay for coverage and what terms you receive. Law firms that understand the underwriting process can present their risk profile more effectively, negotiate better terms, and avoid surprises at renewal. This knowledge is particularly valuable when shopping for new coverage or responding to carrier questions.
Example Usage in Context
A firm preparing for its annual insurance renewal might encounter this in the carrier's proposal: "The underwriter has adjusted our minimum earned premium based on our claims history. Let's discuss with our broker whether we can improve this at our next renewal."
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