INSURANCE PREMIUMS | Definition of INSURANCE PREMIUMS

Premiums due or paid in respect of various classes of insurance should be charged to ? Insurance Account.? Insurance premiums are payable in advance, and at stocktaking times credit may be taken for the apportioned part of the premiums not accrued due, which as a result will appear on the credit side of the Balance Sheet. The effect of this will be to create an equitable charge for insurance against the period?s Profit and Loss Account. Occasionally it occurs that the risk is carried on for a short period under cover notes, the premiums not being paid by the insured until the policies are prepared. In such cases, where the cover note extends over the period of balancing, there will be an accrued liability to bring into account, and the auditor should make a point of enquiring whether any such liability exists. The auditor should verify the accuracy of all apportionments, and should require the official receipt of the insurance company, or, in the case of the first premium, the policy itself to be produced in support of the amount paid as premium. He should also examine the amounts insured to see that the risks are adequately provided for. (See also Auditing, pp. 77 and 80.)

Related Financial Terms

ASSESSMENT AND FRATERNAL INSURANCE, NET PREMIUMS WRITTEN, TONTINE INSURANCE, PREMIUMS IN FORCE, PREMIUMS ON SHARES, HEALTH AND UNEMPLOYMENT INSURANCE DEDUCTIONS, EXTENDED INSURANCE, BROAD FORM INSURANCE, LIFE INSURANCE, CATASTROPHIC ILLNESS INSURANCE Link to This Definition
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