The earned premium assumes that the insurance company did not have to pay out on the policy. If the insurance company did, it may have taken a loss, since the cost of the premium is rarely high enough to cover any serious claims. This is why insurance companies calculate potential losses carefully, because they want to balance out their risks.The unearned premium is the part of the premium which the insurance company has not yet earned because it has not provided coverage for the full term of the policy.

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