Unearned Premium Reserve Law and Legal Definition

Unearned premium reserve is an amount set aside in the accounts of an insurer or reinsurer that represents the amount of premium applicable to the unexpired portion of the policy. It is a reserve to assure the return of unearned premiums. It comes about as the natural result of collecting premiums in advance for insurance to extend over a stated period of time in the future. It is the estimated aggregate amount which an insurance company would be obliged to tender to its policyholders as returned premiums for the unexpired terms, if it wish to cancel every policy in force.