Cancellation (insurance)#Earned Premium

Insurance companies is for the portion of the gross premiums, the income for a certain period after the balance sheet date, to make provision for unearned premiums in the balance sheet of the financial statements ( § 341 e para 2 No. 1 Commercial Code ).

The provision for unearned premiums in the nature of deferred income on the basis of the determination methodology. However, they are still shown under the actuarial provisions. Because ultimately they fulfill the function of a provision. Taking into account the short-term maturities of most contracts are made for unearned premiums, and the most consistent risk assumption at this time no significantly different value would result in most cases in the calculation of the settlement residue. Therefore, the contribution carryover in these cases can also be considered as an approximation for a life insurance provision.

In most types of insurance a temporal proportionality between contributions and risk experience is given. Then, the contribution proportional split after deduction of premium components, which account for collection costs ( life insurance ) or commissions ( casualty ) for the fiscal year and the following year. Tax regulations are the costs that may be collected directly, limited to 4 % in life insurance and 85 % of the actual commissions incurred in all other cases.

For example, an accident insurance contract have an annual fee of 636 euros and 100 euros there are commissions ( 85% of whom are 85 euros ) was paid. The contribution due date is October 1. Then, nine months of the policy year for the following calendar year and the contribution carryover December 31, calculated as

( € 636 - € 85 ) × 9 ÷ 12 = € 413.25.

Is such proportionality of the risk during the insurance period not given, the contribution carryover may need to be modified or determined explicitly the performance backlog with actuarial methods.

In most countries, such as Under U.S. GAAP, unearned premiums are only recognized for insurance contracts for which no coverage provision is made ​​, as the posts are already there, so take into account how they are actually paid. In Germany, the actuarial reserve is but traditionally calculated based on the annual contributions even if the contributions are paid in installments during the year. Then, however, the insurance provision is interpolated at the balance sheet date so that, ultimately, the result corresponds to a monthly premium payment. Be paid at greater distances the contributions, a contribution carryover must be made to correct for life insurance contracts.

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