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Simple English definitions for legal terms
advance premium
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A quick definition of advance premium:
An advance premium is a payment made before the start of an insurance policy's coverage period. It is the amount of money that must be paid upfront to keep the policy in effect. The opposite of an advance premium is an earned premium, which is the portion of the premium applicable to the coverage period that has already expired. The net premium is the premium amount for an insurance policy less agent commissions, while the gross premium is the net premium plus expenses. The premium rate is the price per unit of life insurance, usually expressed as a cost per thousands of dollars of coverage.
A more thorough explanation:
Advance premium refers to a payment made before the start of the period covered by an insurance policy. It is a type of premium, which is the periodic payment required to keep an insurance policy in effect. For example, if you pay for a year's worth of car insurance upfront, that payment is considered an advance premium.
Another type of premium is earned premium, which is the portion of an insurance premium applicable to the coverage period that has already expired. For instance, if you have a one-year insurance policy that costs $1,200, the earned premium after three months is $300.
Unearned premium, on the other hand, is the portion of an insurance premium applicable to the coverage period that has not yet occurred. Using the same example as above, the unearned premium after three months is $900.
Overall, advance premium is just one type of premium payment in the insurance industry.