Minimum earned premium

The non-refundable portion of your insurance premium if you choose to cancel early.


What is a minimum earned premium?

A minimum earned premium is the portion of your premium that the insurance company keeps to cover its costs. Typically, it’s non-refundable even if you decide to cancel your policy early.

How does a minimum earned premium work?

When you buy an insurance policy, unless you pay monthly, you typically pay your premium in advance for coverage that lasts a certain period, like a year. In turn, the insurance company provides coverage for that entire period.

But they also have certain fixed and admin costs related to setting up and managing your policy, like paperwork, underwriting and customer service. So, to cover these costs, the insurance company sets a minimum earned premium.

This means that, even if you cancel your policy before the period ends, they’ll keep at least this minimum amount of your premium to cover their expenses. The rest of the premium can be refunded if you cancel early.

Minimum earned premium vs. fully earned premium: What’s the difference?

In comparison, a fully earned premium means the entire premium you paid for your insurance policy is non-refundable from the moment you purchase the policy. So, if you cancel your policy, it doesn’t matter at which point — you won’t get a premium refund.

Fully earned premiums are more common in short-term or specialized policies, while minimum earned premiums are present in standard insurance policies.

What types of insurance policies include minimum earned premiums?

Business insurance typically includes minimum earned premiums because businesses often need coverage for an extended period and face many potential risks. Types of business insurance policies with minimum earned premiums include:

  • General Liability insurance. General liability policies can help cover you against risks like bodily injury, property damage, or personal injury. So, a minimum earned premium helps the insurer cover administrative costs when setting up the policy.
  • Commercial Property insurance. This policy can help to protect your physical assets, such as buildings, equipment, and inventory. Minimum earned premiums are often found in these policies since they provide coverage for a specified period, and insurers want to cover their expenses.
  • Workers’ Compensation insurance. Typically required by law, workers’ comp can help you cover employees’ medical expenses and lost wages due to work-related injuries or illnesses. Minimum earned premiums can be present to ensure the insurer covers its costs associated with underwriting and claims administration.
  • Business Owner’s Policy (BOP). A BOP is a bundled insurance policy that includes general liability insurance and commercial property insurance.

How NEXT simplifies insurance

At NEXT, small businesses are our top priority. This means our policies and quotes are clearly outlined in easy-to-understand language. If you cancel your policy at NEXT before it expires, you will receive a prorated refund for any unused premium.

Get started by answering a few questions online and receive your custom instant quote in less than 10 minutes. Plus, easily access and share your certificate of insurance with others 24/7 on the NEXT app.

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Business insurance is divided into different policies. We offer seven types so it's easy to design the coverage that fits your business.
General Liability insurance
General Liability
Protect yourself from accidents that cause physical injury or damaged property.
Professional Liability or Error and Omissions Insurance
Professional Liability/E&O
Shield yourself from lawsuits that claim your work errors caused financial losses.
Workers' Compensation Insurance
Workers’ Compensation
Cover medical bills and lost wages if your employees have an accident at work.
Commercial Auto Insurance
Commercial Auto
Stay on the road with coverage for dents, tows and damage to someone else’s vehicle.
Tools & Equipment Insurance
Tools & Equipment
Upgrade your general liability coverage to protect any gear that’s stolen, damaged or lost.
Commercial Property Insurance
Commercial Property
Keep your building, inventory and equipment protected from fire or water damage.
Business Owner’s Policy Insurance
Business Owner’s Policy
Combine general liability and commercial property into one policy to protect your business.
* To the extent permitted by law, applicants are individually underwritten, not all applicants may qualify. Individual rates and savings vary and are subject to change. Discounts and savings are available where state laws and regulations allow, and may vary by state. Certain discounts apply to specific coverages only.
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© 2024 Next Insurance, Inc. 975 California Ave, Palo Alto, CA 94304, United States
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Issuance of coverage is subject to underwriting. Not available in all states. Please see the policy for full terms, conditions and exclusions. Coverage examples are for illustrative purposes only. Your policy documents govern, terms and exclusions apply. Coverage is dependent on actual facts and circumstances giving rise to a claim. Next Insurance, Inc. and/or its affiliates is an insurance agency licensed to sell certain insurance products and may receive compensation from insurance companies for such sales. Policy obligations are the sole responsibility of the issuing insurance company. Refer to Legal Notices section for additional information.

Any starting prices or premiums represented before an actual customer quote are not guaranteed and are representations of existing premiums of active policies as of December 6, 2023. To the extent permitted by law, applicants are individually underwritten, not all applicants may qualify. Individual rates and savings vary and are subject to change. Discounts and savings are available where state laws and regulations allow, and may vary by state. Certain discounts apply to specific coverages only.