How to record reinstatement premium
Accounting for additional premium billed to a client to restore policy limits following a claim.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Premium Receivable | Asset | 5,000.00 | - |
| Premiums Payable - Carrier | Liability | - | 4,500.00 |
| Commission Income | Revenue | - | 500.00 |
💡 Accountant's Note
When a loss occurs, policy limits may be reduced. Reinstatement premium restores these limits, creating a new receivable for the broker and a corresponding payable to the carrier.
Practitioner & Systems Framework
💻 ERP Architecture
Process as an endorsement type in the brokerage management system to ensure correct tax calculation.
⚠️ Audit Flags
Claims filed without a corresponding reinstatement premium entry where the policy wording mandates such payment.
📄 Required Documentation
Endorsement document signed by the underwriter and the claims settlement notice.
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Expert Analysis by Qusai Ahmad
General Accountant Supervisor & IFRS Specialist
Specialized in SAP GUI automation and Middle Eastern tax compliance. Building digital tools for the next generation of finance leaders.
Related Journal Entries
Insurance Broking & MGA
Insurance Commission — Recognized at Policy Inception/Renewal (Point-in-Time)
Insurance Broking & MGA
Contingent Commission / Profit Sharing — Variable Consideration Constrained Until Carrier Determination
Insurance Broking & MGA
Premium Trust Account — Client Premium Received (Not Broker Revenue — Fiduciary Obligation)
Discussion & Community Questions
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