How do I find Minimum Earned Premium (MEP) or the estimated pro-rated refund amount?
Finding MEP and Pro-Rated Refund Information
The Minimum Earned Premium is the minimum amount that an insurance company will retain, even if a policy is canceled before its expiration date. Typically, the MEP is expressed as a percentage of the total premium.
For most policies, the MEP is generally set at 25% of the total premium. This is a standard practice across many insurance policies, but there can be exceptions based on the policy type or specific carrier guidelines.
Finding MEP and Pro-Rated Refund Information:
The first place to look for MEP and pro-rated refund details is within the policy language itself. Key sections and endorsements will outline the conditions under which MEP applies and how pro-rated refunds are calculated.
Look for a Minimum Earned Premium Endorsement. This is a policy form or endorsement titled "Minimum Earned Premium Endorsement" or something similar. This document will provide specific details about the MEP for that policy.
Be aware of short rate penalties that apply to certain types of cancellations, which can affect the refund amount. These penalties are designed to compensate the insurer for the administrative costs of policy issuance and early termination.
Important Considerations
Multiple Portions of the Policy: Remember that certain endorsements within the policy may be fully earned, impacting the overall refund calculation. Multiple sections of the policy could modify the MEP.
Carrier and State Variations: The application of short rates and MEP can vary by carrier and state, so it's important to be familiar with these specifics when advising clients.
All Premiums 100% Minimum and Deposit: Some carriers include wording in their policy forms indicating that all premiums are considered 100% minimum and deposit. This means that if the actual exposures turn out to be less than estimated at policy inception, the carrier may not issue a return premium following the premium audit.
If you have questions about a specific policy's MEP or refund calculations, consult the underwriting guidelines or reach out to Pathpoint directly for clarification by sending an email to ops@pathpoint.com or through the support live chat, located in the bottom right of your screen.
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