A prepaid expense is carried on an insurance company's balance sheet as a current asset until it is consumed. That's because most prepaid assets are consumed within a few months of being recorded.

Insurance is generally prepaid as companies may purchase it on a six-month, one-year or multiyear term. The total amount of prepaid insurance is not recorded as an immediate expense at the time of ...

But the “wasted” money — minus insurance company expenses and profits — pays the claims of those who are damaged. Auto and other forms of insurance are paid for out of pocket.