Incurred

Incurred is a verb and past participle meaning to become subject to or liable for something, typically costs, debts, or obligations. It is often used to describe expenses or liabilities that arise from actions or events, rather than payments that have already been made.

In accounting and finance, incurred obligations are those that have originated or been caused by a transaction or event. Under accrual accounting, an expense is said to be incurred when the underlying activity occurs or the asset’s consumption begins, even if cash payment takes place later. This contrasts with simply paying an invoice. For example, a company may incur maintenance costs in one month but pay the vendor in the following month. Incurred costs and incurred liabilities are recognized in financial statements to reflect the true economic outcome of operations.

In the insurance field, the term is common in phrases such as claims incurred and claims paid. An incurred claim refers to a loss that has occurred and is likely to generate a payout, regardless of whether the insurer has received notice or processed the claim. The concept of incurred but not reported (IBNR) describes losses that have occurred but have not yet been reported to the insurer, forming part of reserves.

In legal and contractual contexts, one can incur liabilities or penalties through entering into agreements or violating terms. The word emphasizes the creation of obligation rather than the act of settlement or payment.

Etymology traces incurred to Latin incurrere, meaning to run into or bring upon oneself, via Old French.