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MINIMUM AND DEPOSIT PREMIUM <br /> MINIMUM EARNED PREMIUM <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 /> 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 /> 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 /> 47 <br />