Return of Unearned Premium

June 25, 2012

My question is related to return of unearned premium following payment of policy limits after a total loss. The insured sustained a fire, and policy limits were paid on a total loss. Insured now wants to cancel the policy because the insured is not going to reopen the business, and there is no longer a reason to maintain the policy.

The insured wants a return of unearned premium for the three months left on the policy. The carrier said that since policy limits were paid, and insured will not reopen, that return of unearned premium is not warranted.

Florida Subscriber

Unless the policy explicitly states otherwise, it does not matter that a claim has been paid or that the insured does not intend to reopen. If the insured paid for an entire policy period and is cancelling before the end of the period, the unearned premium for that period should be returned.