When the terms of a policy provide that the final earned premium be determined at some time after the policy itself has been written companies may require tentative or “deposit” premiums at the beginning which are readjusted when the actual earned charge has been later determined.
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When the price of insurance is tied to fluctuating values or costs that cannot be known until the end of the policy period, inventory or payroll are two common examples, a deposit or provisional premium or estimated premium may be charged at the outset of a policy with final adjustment to come at the end of the term.