What does Earned Premium mean?

The earned premium is a profit to the life insurance company. Earned premiums are those which are accumulated from life insurance policies where time passes and claims are not being made, and that is the profit of the insurance company. Certainly earned premium calculations depend on the type of the life insurance policy, because the payments the policy holder makes can differ as well: some pay monthly, some quarterly and others on a yearly basis.

Earned Premium explained

If one takes a life insurance policy which costs the beneficiary say £2,000 with a lifespan of two years, here is how earned premiums are calculated: Given the situation that no claims from the side of the beneficiary have been made for 6 months, this means that the company actually earned premiums summing up £500, which is definitely a good profit. Depending on the life insurance company, the calculation of these premiums can be made based on an accountancy related formula, or based on the degree the company was exposed to certain losses.