Earned Premium Calculator

When an insurer collects a premium up front, it has not earned that money yet. It earns the premium day by day, as coverage is provided, and only the elapsed slice counts as revenue. This calculator works out that slice with the standard straight-line pro rata method, then shows the unearned premium that could come back on cancellation, the percentage earned so far, and the daily earned rate, all from one set of inputs.

Quick Answer

How to use the earned premium calculator

Enter three numbers and click Calculate Earned Premium. The results stay hidden until you do, and each field explains its own error if an entry cannot work, such as days covered running past the end of the term.

1. Written premium: the full premium charged for this policy term. If the term is six months, enter the six month premium, not the annual equivalent.
2. Days covered: how many days of the term have elapsed. Count calendar days from the policy start date up to, but not normally including, the cancellation or valuation date.
3. Policy term in days: 365 for a normal annual term, 366 when the term crosses February 29, and the real day count for shorter terms.

Reset restores the worked example on this page, $2,400 over 90 of 365 days, so you can check your own figures against a known answer at any point.

The pro rata formula and the accounting identity behind it

Earned premium is the written premium scaled by the share of the term that has expired. Premium is treated as earned evenly, one day at a time, which is why the method is called straight-line.

The split is not just arithmetic. Under statutory accounting, the unearned portion is a liability, held in the unearned premium reserve, because the insurer still owes coverage or a refund for those days. The federal definition used for premium calculations in 42 CFR 403.254 on calculation of premiums describes the unearned premium reserve in exactly those terms, as the portion of gross premiums that provides for days of coverage after the valuation date, and the industry glossary definition of unearned premium from IRMI’s Risk Education glossary is the same idea in one line: written minus earned, for the unexpired part of the period. Earned premium is also the denominator behind underwriting measures such as a claims loss ratio calculator, which is one reason getting the day count right matters beyond refunds. Where a premium was built up from rating factors first, a base premium calculator covers that earlier step; this page starts once the written premium itself is known.

Worked example: $2,400 written, 90 days into an annual term

An annual policy is written for $2,400. Ninety days in, the policyholder asks what has been earned and what would come back on a pro rata cancellation.

Of every dollar of that written premium, about 25 cents has been earned at day 90 and about 75 cents is still unearned:

The semi-annual column treats the term as 182.5 days, half of 365. A real six month term has a specific day count, 181 to 184 days depending on the months involved, so use the exact count from your policy dates when the refund matters. These percentages are straight-line estimates; leap years and non-standard terms shift them slightly.

Earned premium is not earned exposure

The names collide in search results, so the boundary is worth stating plainly. This page is insurance accounting: a written premium, a policy term, and the share of that premium earned as days pass. The earned exposure calculator is a marketing tool that values unpaid mentions, shares and press coverage in dollars, plus a legacy project mode based on percent complete. It takes no policy inputs at all. If your question involves a cancellation, a refund, an audit, or an insurer’s books, you are on the right page. If your question involves what organic publicity was worth, you want the other one.

There is a second, quieter collision inside insurance itself. Underwriters also use the word exposure for the units a premium is rated on, such as vehicle years or payroll amounts, and earned exposure in that sense means the share of those units attributable to the elapsed period. This calculator does not take exposure units as an input. It works from the premium that those units helped produce, which is the figure refunds and revenue recognition actually use.

Pro rata refunds, short rate penalties and minimum earned floors

The unearned premium is the starting point for a cancellation refund, not a promise of one. Three contract terms decide how much of it you actually receive.

On top of either method, many policies set a minimum earned premium: a floor, often 25% of the term premium or a flat amount, that the insurer keeps even if you cancel almost immediately. Fees for inspections, filings or policy issuance may also be fully earned at inception and never refundable. Premium that is added mid-term follows its own clock: an endorsement charged part-way through is earned from its effective date to the end of the term, which is the same pro rata idea applied to a shorter window, and tools such as an annualized endorsement premium calculator handle the pricing side of that change. Run each separate premium through this calculator with its own days covered, then add the earned figures together.

What competing calculators miss

The rival tools in this space are not wrong; most of them are simply narrower, and one gap is worth naming in our own tool too.

• One number only: several earned premium tools return the earned figure and stop. The refund question, the percentage question and the daily rate question then need three more calculations by hand. This page returns all four figures from one pass.
• Months instead of days: month based tools are quick, but a month is not a unit. Treating four months as exactly a third of a year can move a refund by several dollars against a real day count, and leap years disappear entirely. This calculator works in days throughout.
• Date entry is genuinely convenient: the strongest rival asks for policy dates and counts the days for you, including its own rule for whether the cancellation day counts. That is a real convenience this page does not copy; in exchange, the day count here is fully visible, so you can see and challenge the exact convention behind the answer.
• Short rate built in elsewhere: one pro rata rival applies a standard 0.90 short rate factor inside its refund lines. This calculator deliberately does not: short rate factors vary by policy and state, so the article states the method and an example instead of baking a guessed penalty into the result.

When straight-line is the wrong method

Pro rata assumes risk is spread evenly across the term, which is true enough for most auto, home and liability policies. It is the wrong model when risk is seasonal or front loaded. A snowmobile policy earns most of its premium in winter, a builders risk policy follows construction progress, and some warranty and performance bond premiums are earned on actuarial curves that match premium recognition to expected claims timing. Insurers use earning patterns for those books instead of a daily rate. If your policy documents name an earning pattern, a minimum earned percentage that changes over time, or a fully earned clause for a specific charge, follow the documents. This calculator gives the straight-line benchmark those clauses are measured against, and it is exact for the large class of policies that really do earn one day at a time.

Frequently asked questions

Add This Calculator to Your Website

References