How to use the insurance cancellation refund calculator
- Enter the premium for the whole policy term, without taxes or fees the insurer will not refund.
- Enter the policy start date, the end date and the date you cancel.
- Enter the short-rate penalty from your policy as a percent, or 0 to compare only the pro rata figure.
- Read the pro rata refund, the short-rate refund and the premium the insurer keeps.
Formula
days used = cancellation date - start date, term = end date - start date
earned premium = premium x days used / term days
pro rata refund = premium - earned premium
short-rate refund = pro rata refund x (1 - penalty percent)
The penalty is a number you enter because insurers and regions use different tables or none at all. The money is rounded to the cent, half up, at each step.
A $1,200 policy cancelled after 100 days
A policy runs for 365 days and costs $1,200. You cancel after 100 days, so the insurer has earned 1,200 x 100 / 365 = $328.77 and the pro rata refund is 1,200 - 328.77 = $871.23.
If the policy lets the insurer keep 10% of the unearned premium as a short-rate penalty, the refund is 871.23 x 0.90 = $784.11. Cancelling on the start date returns the whole $1,200.00 and cancelling on the end date returns nothing.
Pro rata and short rate
A pro rata refund returns the share of the premium for the days left. A short-rate cancellation keeps something extra to cover the cost of writing a policy that ends early. Some policies refund pro rata when the insurer cancels and short rate when you do, and some refund pro rata either way. Your policy states which applies.
To compare a new policy, the Car Insurance Cost per Month Calculator puts premiums on a monthly footing. The Subscription Upgrade Proration Calculator works the same way for plans that bill by the period.
Fees and taxes
Policy fees, taxes and installment charges may not be refundable. Leave them out of the premium you enter, or the refund will be too high. If you paid in installments, the refund is against what you have paid, so check that too.
Assumptions and limits
- The premium is earned evenly over the days of the term.
- The short-rate penalty is a percent of the unearned premium that you enter. No insurer's table is built in.
- Non-refundable fees are left out of the premium you enter.
- Minimum earned premiums, installment accounts and state or country rules are not modeled.
- This is an example calculation, not insurance or legal advice. Your policy and local rules decide the refund.
Frequently asked questions
Which method will my insurer use?
The policy documents say. Some use pro rata, some use a short rate table, and local rules can require one or the other in certain cases. Ask your insurer for the exact figure.
Why are days counted from the start date?
The day you cancel is the end of the days used, so a cancellation on the start date has zero days used.
Can the cancellation date be after the end date?
No. The tool asks for a date inside the policy term, since a policy that has ended has no refund to compute.
Is the penalty a rate or a flat fee?
This tool treats it as a percent of the unearned premium. If your policy charges a flat fee, subtract it from the pro rata refund.