DEFINITION of 'Advance Premium Fund'

Insurance companies who receive advance premiums must account for the unearned portion of these premiums as a separate liablity item on their balance sheets. This item is commonly referred to as the advance premium fund or account. As the premium is earned, it is run through the income statement.

BREAKING DOWN 'Advance Premium Fund'

Advance premium accounting rules are strictly regulated by the various states, since it can be a large item for smaller companies and is a direct offset to capital. A common way to calculate unearned premiums is by prorating the premiums by the number of days within the period.

RELATED TERMS
  1. Unearned Premium

    The premium corresponding to the time period remaining on an ...
  2. Premium Balance

    The amount of premium that is owed to an insurer for a policy, ...
  3. Basic Premium Factor

    The acquisition expenses, underwriting expenses and profit, as ...
  4. Portfolio Entry

    Portfolio entry is an account of all liabilities that a reinsurer ...
  5. Net Premium

    The expected present value of a policy’s benefits less the expected ...
  6. Direct Premiums Written

    Total premiums received before taking into account reinsurance ...
Related Articles
  1. Investing

    What is a Share Premium Account?

    The share premium account is an equity account found on a company’s balance sheet.
  2. Insurance

    Explaining Premiums

    Premium has a few different meanings in the financial world.
  3. Insurance

    The Basics of Premium Financing for Life Insurance

    Here's a look at the role premium financing plays in life insurance and how it works.
  4. Retirement

    Permanent Life Policies: Whole Versus Universal

    Permanent life insurance combines lifetime insurance with savings to provide lifelong security. Premiums are quite high because they’re partially invested.
  5. Financial Advisor

    Is A Premium Checking Account Worth It?

    Premium checking accounts give you free checking and other perks in return for keeping a certain balance in the bank. Is that the best use of your money?
  6. Insurance

    Can Going to the Gym Lower My Insurance Premiums?

    Find out whether a gym membership and living a healthier lifestyle can lead to lower insurance premiums or other financial rewards.
  7. Investing

    Premium Bonds: Problems And Opportunities

    Learn all about premium bonds and how you can make them work for you.
RELATED FAQS
  1. What sectors are best for an investor seeking a high annual return?

    Find out how the Securities and Exchange Commission regulates the share premium account, otherwise known as additional paid-in ... Read Answer >>
  2. What are the IRS regulations regarding a share premium account?

    Read about the tax treatment, or lack thereof, for a corporation's share premium account, also known as the additional paid-in ... Read Answer >>
  3. How do I calculate insurance premium tax?

    Find out how your health insurance premiums can affect your income taxes, including when you may be able to deduct premium ... Read Answer >>
  4. Does unearned revenue affect working capital?

    Learn how an unearned revenue, or deferred revenue, account affects a company's current liabilities and calculation of the ... Read Answer >>
  5. How does a share premium account appear on a balance sheet?

    Learn where a share premium account shows up on a balance sheet and for what purposes funds in a share premium account may ... Read Answer >>
Hot Definitions
  1. Investing

    The act of committing money or capital to an endeavor with the expectation of obtaining an additional income or profit.
  2. Stagflation

    A condition of slow economic growth and relatively high unemployment - a time of stagnation - accompanied by a rise in prices, ...
  3. Notional Value

    The total value of a leveraged position's assets. This term is commonly used in the options, futures and currency markets ...
  4. Interest Expense

    The cost incurred by an entity for borrowed funds. Interest expense is a non-operating expense shown on the income statement. ...
  5. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  6. Pro-Rata

    Used to describe a proportionate allocation. A method of assigning an amount to a fraction, according to its share of the ...
Trading Center