There are many reasons a business may want to cancel their policy prior to the expiration date, but no matter the reason, a policy holder can cancel the policy at any time.<\/p>\n
Most insurance policies<\/a> are issued on an annual term. 12 months is standard for commercial insurance policies. If the policy is no longer needed, it can be canceled at any time.<\/p>\n The insurance company will typically pro-rate the amount of money owed based on the number of days the policy was active. Earned premium is the amount of premium that the insurance company has earned on your policy as of any given date.<\/p>\n For example, on January 1, you may purchase an annual insurance policy that costs $1,000. On July 1 (exactly 6 months later), the earned premium is $500.<\/p>\n Some policies are subject to a minimum earned premium percentage upon cancellation.<\/p>\n Common minimum earned premiums are 25%, 50%, and 100% of the total premium. If your policy is subject to this, the early cancellation may not result in a straight pro-rate of the earned premium.<\/p>\n For example, a 50% minimum earned premium means you are responsible for paying half of the total premium regardless of when the policy actually cancels\u2014even if coverage was only in place for a week<\/a>.<\/p>\n Please be aware that most state taxes and filing fees cannot be pro-rated or refunded after the policy is issued. Some policies are subject to a 100% minimum earned premium. This means you can cancel the policy early, but will be on the hook for paying the full premium anyway. In this case, there is no benefit or reason to cancel the policy prior to the expiration date.<\/p>\nSo what does \u201cminimum earned premium\u201d mean?<\/h2>\n
What do minimum earned premiums apply to?<\/h2>\n