Prepaid Insurance

DEFINITION of 'Prepaid Insurance'

Payments that are made in advance for insurance services or coverage. The period for which insurance is prepaid is generally one year, but may exceed a year in certain cases. Prepaid insurance that expires in a year is classified as a current asset on a corporation's balance sheet.

BREAKING DOWN 'Prepaid Insurance'

Unless a claim has been made, prepaid insurance is usually renewable by the policy-holder shortly before the expiry date on the same terms and conditions as the original insurance contract. However, the premiums may be marginally higher to account for inflation and other operating factors.

RELATED TERMS
  1. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of ...
  2. Prepaid Interest

    The interest that a debtor pays before the first scheduled debt ...
  3. Cancelable Insurance

    This is insurance that may be canceled, at any time, by the insured ...
  4. Classified Insurance

    Insurance coverage provided to a policyholder that is considered ...
  5. Prepaid Finance Charge

    Charges on a loan agreement which are not included as part of ...
  6. Insurance Premium

    The amount of money that an individual or business must pay for ...
Related Articles
  1. Investing

    What are Prepaid Expenses?

    A prepaid expense is an asset on the balance sheet. Due to accounting principles, expenses are often accrued on the balance sheet and expensed in a later period.
  2. Investing Basics

    The Industry Handbook: The Insurance Industry

    As a result of globalization, deregulation and terrorist attacks, the insurance industry has gone through a tremendous transformation over the past decade. In the simplest terms, insurance of ...
  3. Insurance

    Understanding Your Insurance Contract

    Learn how to read one of the most important documents you own.
  4. Home & Auto

    Exploring Advanced Insurance Contract Fundamentals

    Understanding your contract can help you protect our family's financial security.
  5. Home & Auto

    Intro To Insurance: Fundamentals Of Insurance

    By Cathy ParetoHow does insurance work? Insurance works by pooling risk.What does this mean? It simply means that a large group of people who want to insure against a particular loss pay their ...
  6. Insurance

    What Happens If Your Insurance Company Goes Bankrupt?

    When insurance companies go bankrupt or face financial difficulty, it's bad news for policy holders.
  7. Insurance

    Explaining Insurance

    Insurance is a form of contract between an individual and an insurance company that spreads risk in exchange for premium payments.
  8. Home & Auto

    Bundle Your Insurance For Big Savings

    Bundling your insurance can save you money and time. Read on to see how get the most out of multiline insurance discounts.
  9. Home & Auto

    Intro To Insurance: Conclusion

    By Cathy ParetoInsurance is an integral part of any personal financial plan. The type of insurance and the amount of coverage you obtain all depends on your unique financial and family circumstances, ...
  10. Home & Auto

    The History Of Insurance In America

    Insurance was a latecomer to the American landscape, largely due to the country's unknown risks.
RELATED FAQS
  1. Does working capital include prepaid expenses?

    Discover how prepaid expenses can be classified as short-term assets included in the calculations for determining working ... Read Answer >>
  2. Who benefits the most from prepaid expenses?

    Learn who benefits most when expenses are prepaid. Individuals and businesses often make payments, such as rent or insurance, ... Read Answer >>
  3. What transactions cannot be made using prepaid credit cards?

    Find out about the transactions that are restricted when you use a prepaid credit card, and find out about other ways to ... Read Answer >>
  4. How are prepaid expenses recorded on an income statement?

    Understand how prepaid expenses are recorded on a company's financial statements. Learn why a prepaid expense would be considered ... Read Answer >>
  5. Do prepayments provide working capital?

    Learn how prepayments for various services such as insurance, rent and supplies are included as part of a company's current ... Read Answer >>
  6. What are the differences between deferred expenses and prepaid expenses?

    Learn the difference between prepaid expense and deferred expense and how businesses use and record each in standard accounting ... Read Answer >>
Hot Definitions
  1. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  2. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  3. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  4. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  5. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  6. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
Trading Center