What is earned premium?
Earned premium is the portion of a written policy premium that corresponds to coverage already provided up to an as-of date (i.e., revenue you’ve “earned” by carrying risk through time).
It matters because it directly affects:
- Revenue recognition (matching principle over the coverage period)
- Unearned Premium Reserve (UPR), a balance-sheet liability you can size precisely using the earned vs. unearned split
- Underwriting performance metrics, where earned premium is usually the denominator—especially in the Loss Ratio Calculator, Expense Ratio Calculator, and Combined Ratio Calculator
If you’re doing portfolio or product-line review, earned premium also supports smarter comparisons of unit economics across time windows (not just what was billed). Once you’ve calculated earned premium, you can translate it into underwriting profit and operating efficiency using the Underwriting Profit Calculator
Formula
The simplest straight-line approach earns premium proportionally with time:
Where:
- P = written premium for the policy term
- d = days of coverage earned through the as-of date
- D = total days in the coverage period
Tip: if you’re working on a monthly close, you’ll often run the earned premium output straight into your ratio stack (e.g., Combined Ratio Calculator) so your underwriting KPIs line up with your financial reporting period.
Example
A $1,200 annual policy runs from 2026-01-01 to 2026-12-31, and you’re measuring as of 2026-06-30.
- Days earned (d) = 181
- Total coverage days (D) = 365
Earned premium = $1,200 × (181/365) = $595.07
Unearned premium = $1,200 − $595.07 = $604.93