InsuranceRenewalTools

Prorated Refund Calculator

Estimate the refund due when a policy is cancelled mid-term, including short-rate penalties and cancellation fees.

Last reviewed

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Free · No sign-up · Runs in your browser

Cancelling a policy part-way through its term usually produces a refund, but not always the one people expect. The insurer keeps the premium for the days you were covered, and depending on the policy and on who initiated the cancellation, may keep a penalty on top.

This calculator separates earned premium from unearned premium and applies any short-rate penalty and cancellation fee, so you can check a refund before it arrives.

Your numbers

Results update as you type. Nothing is sent anywhere.

Result

Estimated refund

$665

Earned premium
$655
Unearned premium
$665
Short-rate penalty
$0
Cancellation fee
$0
Days used
181
Days remaining
184
Share of term used
49.59%
Premium per day
$3.62

This is an estimate based on the values you entered. Actual premiums, coverage, eligibility and pricing vary by provider and by individual circumstances.

Pro-rata cancellation refunds the unused days in full. Short-rate cancellation keeps a percentage as a penalty - which one applies depends on the policy and on who cancels.

Some states regulate cancellation refunds. Check the cancellation clause in your policy before assuming a figure.

How to use the prorated refund calculator

  1. Enter the premium you paid for the term.
  2. Enter the policy start date and the intended cancellation date.
  3. Enter the term length in months.
  4. Add any cancellation fee and short-rate percentage stated in the policy.

What people use this for

  • Checking a refund figure from a carrier after cancelling.
  • Deciding whether it is worth cancelling now or waiting for renewal.
  • Working out the true cost of switching carriers mid-term.
  • Estimating the refund on a policy for a vehicle or property being sold.

Worked examples

Every figure below is produced by running this calculator against the example inputs, so the numbers always match the tool.

Cancelling halfway through

A $1,320 annual premium cancelled exactly six months into a twelve-month term, pro rata with no fee.

Estimated refund
$665
Earned premium
$655
Share of term used
49.59%

A short-rate cancellation with a fee

The same cancellation with a 10% short-rate penalty and a $35 fee.

Estimated refund
$564
Short-rate penalty
$67

Pro rata and short rate are different

Pro rata refunds the unused days in full: the insurer keeps only what it earned. Short rate keeps an additional percentage as a penalty, on the basis that the carrier incurred acquisition costs it will not now recover.

Which applies usually depends on who cancels. Cancellation by the insurer is normally pro rata; cancellation by the policyholder may be short rate, depending on the policy and the jurisdiction.

Fees, and what is not refundable

Policy fees are frequently fully earned at inception and are not refunded at all. Instalment fees already charged are not returned either. Only the premium itself is subject to the refund calculation.

Some jurisdictions regulate cancellation refunds and prohibit short-rate penalties on certain lines. Check the cancellation clause of your own policy, and your local rules, before assuming a figure.

Methodology and assumptions

What this calculator does, and what it deliberately does not do.

  • Earned premium is the premium multiplied by days used divided by total days in the term. Unearned premium is the remainder.
  • The short-rate penalty is applied to the unearned premium, then the cancellation fee is subtracted.
  • Fully earned policy fees are not modelled; enter them as a cancellation fee if your policy treats them that way.
  • All figures are estimates produced from the values you enter. This site has no rate feed and no carrier data, so it cannot quote or price a policy.
  • Nothing you type is transmitted or stored - the calculation runs entirely inside your browser.

This calculator provides an estimate based on the information you enter. Actual insurance premiums, coverage, eligibility and pricing vary by provider and individual circumstances.

This website is not an insurance company, an insurance agency or a licensed broker. It does not sell insurance, does not provide insurance quotes, and is not authorised to give advice about which policy you should buy.

No result produced here is an offer of insurance or a guarantee of coverage. Only a licensed insurer or agent, working from your verified details, can quote or bind a policy.

Frequently asked questions

How long does a refund take?

Typically a few weeks, depending on the carrier and the payment method. A refund to a finance company on a financed premium can take longer.

Can the insurer refuse to refund?

Not for unearned premium in most jurisdictions, though short-rate penalties and non-refundable fees are common and are usually enforceable if disclosed.

Should I cancel or let the policy lapse?

Cancel. A lapse for non-payment appears differently from a clean cancellation and can affect future pricing and eligibility.

What if I cancel because I sold the car or house?

The calculation is the same, though many carriers apply pro rata rather than short rate where the insured item no longer exists. Ask, and cite the reason for cancelling.

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