Tender Of Unearned Premium

What Does Tender Of Unearned Premium Mean?

The tender of unearned premiums is an insurance law requiring an insurance company to refund unearned premiums to the policyholder if the policy is canceled. Typically, the company must issue the refund within a specified time frame after receiving notification of the cancellation, which varies by state. Failure to comply may result in court-imposed penalties on the insurance company.

Insuranceopedia Explains Tender Of Unearned Premium

Unearned premiums are payments made by a policyholder to the insurance company that has not yet been used, either because the insurance company has not been exposed to the covered risk or the policy has not yet expired.

When a policy is canceled, these unearned premiums must be refunded to the policyholder. For example, under California law, if the insured has not been covered by the insurer before the policy expires, the full premium must be returned. If the insured has received partial coverage, they are entitled to a portion of the premiums paid. This rule is one reason it usually pays to check prices again before you renew, since most drivers who cancel mid-term get a prorated refund when they go through the process of switching car insurance carriers.

To legally cancel a policy, the policyholder must return the policy or insurance contract to the company. If the company cancels the policy, it must notify the policyholder. The same procedure applies when you are shopping for a new homeowners policy and need to end the old one cleanly, since the refund is owed from the date the cancellation request is received rather than the date of the original renewal.