Alberta General Insurance Level 1 Practice Exam

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What does unearned premium represent?

  1. Premium for potential future claims

  2. Premium that has been refunded

  3. The used portion of the premium

  4. The portion of premium not yet earned for the policy period

The correct answer is: The portion of premium not yet earned for the policy period

Unearned premium represents the portion of premium that has not yet been earned for the policy period. This means that the insurance company has not yet provided coverage for the amount of premium paid. Option A is incorrect because it refers to potential future claims, which are not related to unearned premium. Option B is also incorrect because a refunded premium implies that coverage has already been provided. Option C is incorrect because it refers to the used portion of the premium, while unearned premium represents the unused portion.

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