INSURANCE

Pro Rata Cancellation Calculator

Canceling a policy early? See why a short-rate refund comes out smaller than a straight pro rata one — the two figures side by side, with the early-cancellation penalty and the exact day count behind them.

Compare a short-rate and pro rata refund Enter your premium, dates, and penalty to see both refunds and the steps.

Start from a common case:

Short-rate refund

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Enter your premium and policy dates to see both refunds and the steps.

The short-rate refund is your pro rata refund minus an early-cancellation penalty. Real short-rate tables charge a steeper penalty for cancellations early in the term, so your actual refund may be lower than a flat penalty shows — your insurer's short-rate table is the final word. When the insurer cancels, you usually get the full pro rata refund with no penalty.

Calculation method See both refunds worked out with your numbers

The steps fill in with your own numbers as soon as you enter your policy dates. Figures shown are illustrative; your policy's short-rate table is the final word.

Plain language

What "short-rate" actually means

Short-rate is a penalty for leaving early. Instead of refunding every unused day in full, the insurer keeps a slice as a short-rate charge, so your refund is smaller than a straight pro rata one. It usually shows up when you cancel mid-term; if the insurer cancels or non-renews, you normally get the full pro rata amount instead.

▲ The 90% rule, and why it's only a rule of thumb

A common one-year convention keeps 10% and returns about 90% of the pro rata refund. But many insurers use a short-rate table where the penalty shifts with how early you cancel, and states regulate it differently. Set the penalty above to your insurer's number — the 10% default is a starting point, not a promise.

How it's calculated

Pro rata first, then the penalty

Short-rate refund = [(premium ÷ total days) × unused days] × (1 − penalty)

The part in brackets is the ordinary pro rata refund — your unused premium counted from the cancellation date to the policy end. The short-rate method then subtracts an early-cancellation penalty from that figure. The bigger the penalty, the smaller your refund. The penalty is rarely the only deduction, though — a minimum-earned clause can cap the refund outright and policy fees come off on top; the prorated calculator for insurance puts all three together.

A worked example

Say you paid $1,200 for a 12-month car policy and cancel on day 100, leaving 265 unused days on an Actual/365 basis. The pro rata refund is $1,200 ÷ 365 × 265 ≈ $871. Apply the common 10% short-rate penalty and you keep 90% of that — about $784 — with the remaining $87 held back as the early-cancellation charge. Same dates, same premium; the only difference from the pro rata figure is that penalty. If your insurer's number is off from this, switch the day-count basis or set the penalty to their short-rate factor and the steps will show exactly where the gap comes from.

Canceling a policy is one use of proportional math; the same formula behind this page powers the general pro rata calculator for any partial-period amount.

Short-rate table

Reading a short-rate cancellation table

There is no single universal short-rate cancellation table. Each insurer files its own with the state, and it lists the share of the annual premium the company keeps — the earned premium — for a policy canceled after a given number of days. The rest is your refund. Because the penalty is front-loaded, a short-rate table keeps proportionally more when you cancel early in the term and almost nothing near the end.

To read yours: find the number of days your policy was in force, read across to the retained (earned) percentage, and the remaining share of your premium is the refund. If you don't have your insurer's table, the illustration below uses the common flat 10% penalty so you can see the shape — set the penalty above to your insurer's factor for your own figure.

Cancel after	Pro rata refund	Short-rate penalty	Short-rate refund
1 month	$1,101	$110	$991
3 months	$901	$90	$811
6 months	$598	$60	$538
9 months	$299	$30	$269

Illustrative only, for a $1,200 twelve-month policy on an Actual/365 basis at a flat 10% penalty. Real short-rate tables charge a steeper penalty for early cancellations, so your figure may differ — your insurer's filed table is the final word.

Questions

Frequently asked

What is a short-rate cancellation?

It's a mid-term cancellation where the insurer keeps a small penalty on top of the premium you actually used, so your refund comes out smaller than a straight pro rata one. It typically applies when you — the policyholder — cancel early, rather than the insurer canceling or non-renewing.

Why is a short-rate refund smaller than a pro rata refund?

A pro rata refund returns your unused premium strictly in proportion to the time left, with no penalty. A short-rate refund starts from that same pro rata figure and then subtracts an early-cancellation penalty, so you get back less. The calculator shows both figures and the penalty between them.

What is the short-rate penalty, or the "90% rule"?

The most common one-year convention keeps a 10% penalty — you receive about 90% of the straight pro rata refund. That is only a convention: many insurers use a short-rate table where the penalty changes with how far into the term you cancel, and some states regulate it. Adjust the penalty field above to match your insurer, and treat your policy as the final word.

When does short-rate apply instead of pro rata?

It depends on who cancels and what your policy says. When the insurer cancels or non-renews, you normally get the full pro rata refund with no penalty. When you cancel mid-term, some insurers apply the short-rate method. Your policy's cancellation clause states which applies to you.

How do I find my exact short-rate factor?

It comes from your insurer's short-rate table (often filed with your state) or your policy documents — it is not a single universal number. Enter the penalty your insurer quotes into the field above to reproduce their figure; if you do not have it yet, the 10% default gives you a realistic ballpark to check against.

Is a short-rate cancellation penalty legal?

In the US, short-rate cancellation is a generally accepted practice, but it is regulated at the state level and the allowed method varies. This is general information, not legal or financial advice — check your policy and, if a refund looks wrong, your state Department of Insurance.

Does the day-count basis change the short-rate refund?

Yes, indirectly. The penalty is applied to the pro rata refund, and that pro rata figure depends on how days are counted — Actual/365, a 360-day basis, or 366 across a leap year. Switch the basis above if your insurer's figure is a few dollars off before assuming the penalty differs.

Is there a standard short-rate cancellation table?

No single table is universal — each insurer files its own short-rate table with the state, so the exact percentages vary. They all share one shape: the penalty is a larger share of your refund the earlier in the term you cancel, and shrinks to almost nothing near the end. Ask your insurer for the filed table, or the short-rate factor for your cancellation date, and enter it above.

How do I read a short-rate cancellation table?

Find the number of days your policy was in force, read across to the retained (earned) percentage, and the remaining percentage of the annual premium is your refund. If the table says the insurer keeps 35% for your days in force, you get back 65% of the premium. If you only have the penalty as a percentage of the pro rata refund, enter that in the penalty field above instead.

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