My balance sheet reflects prepaid insurance of $1,200 for Dec 31. It is a 3 year policy that started Jan 1. How do I make adjustments for the year and what should the corrected amount be?

Why not put the insurance time of coverage on a monthly basis. The three-year term would be, ergo, 36 months and each payment would consititute 1/36th of the total amount paid.
$1200 therefore, would be expressed as $33.33 per month, or $400 annually. The paid instaallments would amount to 7 months payment... January - July = $233.33 leaving the asset amount on the books of $1200 minus the paid amount = $966.67. On December 31, there would be $800.00 of asset value on the books.

I know there is a term for this kind of asset... the word escapes me. Its been a long time since I had to do bookkeeping to a trial balance.

My balance sheet reflects prepaid insurance of $1,200 for Dec 31. It is a 3 year policy that started Jan 1. How do I make adjustments for the year and what should the corrected amount be?

Debit insurance expense $400
Credit prepaid insurance $400
$1,200/3yrs = $400/yr

Prepaid insurance will then amount to $800 on the balance sheet for the first year ended Dec 31, $400 for the second year and $0 for the third year.