How to Calculate Earned Premium

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    • 1). Get the start date of the insurance policy and the prepaid insurance premium amount. The information should be on your insurance policy document.

    • 2). Find the expired portion of the insurance policy's length of coverage. Subtract the start date from the current date and divide it by the policy period. For example, if a one-year auto insurance policy came into force on Jan. 1, then four months will have expired on May 1, which is about a third (4 / 12) of the policy length.

      You also can calculate the expired portion in days---365 days per year and 366 days per leap year---instead of months. Assuming a 365-day year, 121 days (31 + 28 + 31 + 30 + 1) will have expired on May 1, which is about a third (121 / 365) of the policy length.

    • 3). Calculate the earned premium, which is equal to the expired portion multiplied by the prepaid premium. To conclude the example, if the prepaid premium was $500, the earned premium on May 1 is about $167 ($500 x 0.33).

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