Written Premium
Also known as: gross written premium, GWP
Written premium is the full premium on every policy an insurer binds in a period, recorded up front when the policy is written. Buy an annual policy for $1,200 on day one and the carrier books $1,200 of written premium immediately — even though it has not yet provided a full year of coverage.
That distinction drives the difference between written and earned premium. As each month of coverage elapses, a slice of the written premium converts to earned premium; the not-yet-earned remainder sits as unearned premium, which the carrier would refund pro-rata if you cancel mid-term (subject to any minimum earned provision).
For a business owner, written premium is essentially your annual bill at bind — the figure a premium audit may later true-up if your actual payroll or sales differ from the estimate used to write the policy. Insurers track written-premium growth as a top-line volume metric, separate from whether that business is profitable (see combined ratio).
Real-world scenario
Summit Ridge Roofing LLC, a 14-employee contractor in Denver, buys three policies on the same June 1 effective date. Its workers' compensation policy is quoted at $48,000 in annual premium, its general liability policy at $14,500, and a commercial auto policy on two trucks at $9,200. The moment each policy is bound, the insurer records the full $48,000, $14,500, and $9,200 as written premium — a combined $71,700 booked on day one, even though Summit Ridge will pay it monthly at roughly $5,975 per installment.
Written premium is a bookkeeping snapshot, not cash collected. By September 1 (three months in), Summit Ridge has only "used" about $17,925 of coverage — that portion becomes earned premium, while the remaining $53,775 sits as unearned premium, a liability the carrier would refund if the policy cancelled early. When the roofer's payroll comes in higher than projected, a year-end premium audit adds $6,300 in additional written premium.
That distinction matters at claim time too. When a slip-and-fall injures a subcontractor and the GL claim settles for $185,000 against a $1,000,000 per-occurrence limit after a $2,500 deductible and $22,000 in defense costs, none of that touches the written-premium figure — written premium measures what was billed for coverage, not what was paid out. The carrier tracks the $185,000 loss separately to judge whether the $71,700 price was adequate.
How it affects your premium
Written premium is the gross amount an insurer books when a policy is issued or renewed. Several factors drive how large that figure is for a given business:
- Exposure size — Written premium scales with the underlying exposure basis (payroll, sales, vehicle count, or square footage). A contractor doubling its crew roughly doubles its workers' comp written premium.
- Base rates and class code — The insurer's filed rate for the applicable NCCI class code multiplies against exposure; higher-hazard codes book far more premium per unit.
- Mid-term endorsements — Adding a vehicle, location, or higher limit generates additional premium that is booked as new written premium the day the change binds.
- Audit adjustments — A year-end premium audit that finds higher-than-estimated payroll produces extra written premium; lower payroll can generate a return premium that reduces it.
- Policy term and cancellation — A full 12-month term books more written premium than a short-term policy, and a mid-term cancellation reverses the unearned portion.
- Experience and schedule modifiers — An experience modifier above or below 1.00 raises or lowers the premium booked at issuance.
Common misconceptions
Myth: Written premium is the money the insurance company has actually collected in cash.
Reality:
Written premium is booked in full the moment a policy is bound, regardless of whether the insured pays annually or in monthly installments. Cash flow is tracked separately — a business on a payment plan still generates 100% of its written premium on day one.
Myth: Written premium and earned premium are the same number.
Reality:
They only match at the very end of the policy term. Written premium is booked up front; it converts to earned premium gradually as time passes, with the not-yet-earned balance held as unearned premium.
Myth: A big written-premium number means the policy was profitable for the insurer.
Reality:
Written premium says nothing about profitability. Insurers compare premium against losses and expenses using the loss ratio and combined ratio — a high-premium book can still lose money if claims run hot.
Frequently asked questions
What's the difference between written premium and earned premium?
Written premium is the full amount booked when a policy is issued. Earned premium is the slice of that amount attributable to coverage time that has already elapsed. Six months into a 12-month policy, roughly half of written premium has become earned.
Does written premium change during the policy term?
Yes. Mid-term endorsements that add coverage create additional premium, and a premium audit can add or subtract premium after the term based on actual exposures.
If I cancel my policy early, what happens to the written premium?
The unearned portion is reversed. On a standard pro-rata cancellation you get back the unearned premium, though a minimum earned or short-rate provision may let the carrier keep a bit more.
Why do insurers report written premium instead of just cash collected?
Written premium measures new business volume and growth at the point of sale, independent of payment timing. It lets carriers and regulators size a book of business and compare it against losses using ratios like the loss ratio.
Does written premium include the deductible I pay on a claim?
No. Written premium is purely the price of the coverage. Your deductible and any claim payouts are separate transactions that never affect the written-premium figure.
Sources cited
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