Premium which is earned as written is called monthly premium.

Question

Options

• ATrue
• BFalse

• A
  74% (20)
• B
  26% (7)

Explanation

Option A is correct because in insurance accounting, a monthly premium is defined as one that is fully earned within the same period it is written - meaning the insurer recognizes 100% of the written premium as earned revenue in that same month, leaving no unearned portion to carry forward. This occurs because the entire coverage period (one month) is consumed within the accounting period in which the policy is written. Option B is incorrect because the statement is an accurate reflection of standard insurance terminology, not a false one - the "earned as written" characteristic is precisely what distinguishes a monthly premium from longer-term premiums (annual, semi-annual), where only a pro-rata fraction of the written premium is earned each month as future coverage is still owed.

Memory tip: Think "monthly = no leftovers." With a one-month policy, there is no future coverage period for the premium to remain "unearned" - it's all consumed as soon as it's written, making earned = written.

No community discussion yet for this question.