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Attachment number I <br />Page 47 of 43 <br />ire <br />'" MINIMUM AND DEPOSIT PREMIUM <br />M1IVT1 41T1%4 V AD1V1 " DDV_N4YYTA4 <br />ft <br />The following terms are often misunderstood, particularly among insureds or producers not <br />accustomed to dealing with surplus lines insurance companies. It is important that the definitions <br />are understood. <br />M I MINIMUM AND DEPOSIT <br />This is the amount of premium due at inception. Although the policy is subject to adjustment <br />based on a rate per exposure unit, under no circumstances will the annual earned premium be <br />less than the minimum premium. Therefore, the policy may generate an additional premium on <br />audit, but not a return. <br />If such a policy is cancelled mid -term, the earned premium is the GREATER of the annual <br />minimum times the short rate or pro -rata factor, or the actual earned as determined by audit, <br />subject to a short rate penalty if applicable. <br />MINIMUM EARNED PREMIUM <br />A minimum earned premium endorsement can be attached to either a flat charge policy or an <br />adjustable policy. In either case, this amount is the LEAST that will be retained by the insurance <br />F" company once the policy goes into effect. The amount retained would be the GREATER of the <br />annual earned premium whether calculated on a pro -rate or short rate basis, or the minimum <br />earned premium. <br />FLAT CANCELLATIONS <br />Surplus lines insurance companies normally do not allow flat cancellations. Once the policy is in <br />effect, some premium will be earned. <br />If you need further explanation, please do not hesitate to contact us. <br />M <br />ar <br />Agenda Item No. l0A <br />153 <br />