What Does Tender of Unearned Premium Mean?
Tender of unearned premium is an insurance law that mandates the insurance company to return unearned premiums to the insured in the event of policy cancellation. Most often, a specific period is given to do that after the company is notified depending on the state. Failure to do so may lead the court to penalize the company.
Insuranceopedia Explains Tender of Unearned Premium
Unearned premiums are payments done by a policyholder to the insurance company that have not yet been utilized because the latter has not been exposed to the risk covered or the policy has not yet expired.
When the policy is cancelled, these unearned premiums should be returned to the policyholder. Here's a real world look at a law. Under California law, when the insured has not been covered by the insurer before expiration of the policy, it should be returned in full. If he or she has been partly covered, then he or she gets a portion of the premiums paid.
To legally cancel a policy, the policyholder returns the policy or insurance contract to the company. If the company cancels a policy, it notifies the policyholder.