Premium Balance

What Is Premium Balance?

Premium balance is the amount of premium that is owed to an insurer for a policy however that has not yet been paid by the policyholder. The premium balance will diminish in value throughout the span of the policy term as the policyholder makes installment payments. Policyholders may here and there request a refund of any unearned premium.

Figuring out Premium Balance

Numerous insurers allow policyholders to pay for their policies in installments. Paying the full value of a policy's premium can be a test on your spending plan to do at the same time, and offering different payment structures allows insurers to arrive at a more extensive market. This type of policy feature is most frequently seen in [auto insurance](/accident protection), which might offer month to month, quarterly, semi-annual, and annual installments.

Insurers allow policyholders to pay premiums over an extended period of time since they can extricate an installment fee for the privilege. For instance, a collision protection company might allow the premium balance to be paid month to month yet will add a small fee to the month to month premium due. Moreover, the insurer might charge a cancelation fee in the event that the policy is canceled before the policy term has come to a close. This fee, called the short rate, is ordinarily a percentage of the leftover policy premium.

Insurers account for premiums in various ways relying upon whether the premium has been collected, whether it is thought of "earned" on the basis of time elapsing without a claim, and the amount of the premium was paid in advance.

Unearned premiums are viewed as a liability on the balance sheet until sufficient time has elapsed between premium assortment and claims not being made against the policy. Assuming the insurer's business increments from one year to another, earned premiums will probably be under written premiums. This is on the grounds that the premiums are viewed as fully paid when they are underwritten, and the balance — the unearned premium — addresses the premium credited to the unexpired part of the policy.

Tips for Policyholders

Decreasing that balance due takes some planning. Policyholders can pay the premium balance in different ways: cash, check, or credit card. Paying with credit card installments can be beneficial in the event that the cardholder has a rewards or cashback card, earning benefits while making payments. Along these lines, you can reduce your premium by 2% or more, generally, or get airline miles or different advantages, contingent upon what the card offers.

In picking an insurance policy, it generally pays to shop around, particularly assuming you've been with similar company for a long time. Numerous online locales will compare various policies and give you price statements. At long last, hope to check whether you're paying for insurance features you needn't bother with. Maybe towing coverage is on your auto policy and you have AAA, or perhaps your deductibles are too low.

Even if dropping your current policy to go with another one from an alternate insurer can bring about an undesirable cost, the long-term benefit of switching could wind up saving you money. Even more, in the event that you let your current insurer know that you are leaving, they might captivate you to remain by furnishing you with certain benefits or a reduced premium. It's consistently worth inquisitive how the insurance company can help you on the off chance that you've been a customer for a long period of time.

Illustration of Premium Balance

John purchases another vehicle and purchases collision protection to safeguard himself in the event of an auto accident or theft. He purchases his insurance policy from Insurance ABC. The policy costs $1,000 per year and John chooses to make quarterly payments, which amounts to four payments per year of $250.

The year continues and it is presently the finish of June. Two quarters have passed and John has made two payments of $250 each for his accident protection, adding up to $500. The amount left on his policy for the year is $500, which is his premium balance.

Features

• Premium balance alludes to the amount of insurance premiums that are owed to an insurer for a policy however that poor person yet been paid by the policyholder.
• Insurance companies characterize premiums as either unearned premiums or earned premiums.
• For any unearned premium, policyholders may here and there request a refund.
• The premium balance will diminish over the long run as the policyholder makes ordinary installment payments until the policy is paid in full, wiping out the premium balance.
• Policyholders might be charged installment fees or cancellation fees assuming they pay in installments, which makes the option appealing to insurance companies.
• Insurance companies allow premiums to be paid in installments as that is generally simpler for a policyholder and, thusly, makes purchasing insurance more appealing.