1. What is Pro Rata Refund?

The Pro Rata refund is a calculation used in insurance to determine the amount to be refunded when a policy is canceled before its expiration date. It's based on the unused portion of the premium.

2. How Does the Calculator Work?

The calculator uses the Vertafore standard pro rata formula:

Where:

• \( Premium \) — Original premium amount in USD
• \( Remaining Days \) — Days remaining in policy period
• \( Total Days \) — Total days in original policy period

Explanation: The equation calculates the portion of the premium that corresponds to the unused coverage period.

3. Importance of Pro Rata Calculations

Details: Accurate pro rata calculations are crucial for fair policy cancellations, premium adjustments, and regulatory compliance in the insurance industry.

4. Using the Calculator

Tips: Enter the original premium amount, remaining days in policy period, and total days in original policy period. All values must be valid (premium ≥ 0, remaining days ≥ 0, total days > 0).

5. Frequently Asked Questions (FAQ)

Q1: Why use pro rata instead of short rate?
A: Pro rata is the standard fair calculation for voluntary cancellations, while short rate (with penalty) is typically used for insurer-initiated cancellations.

Q2: How are partial days handled?
A: The Vertafore system counts full days only. Any partial day is typically rounded to the next full day.

Q3: Does this apply to all policy types?
A: Most property and casualty policies use pro rata, but some specialty policies may have different cancellation provisions.

Q4: What if remaining days exceed total days?
A: The calculator will not compute a result in this case as it's mathematically impossible (remaining days must ≤ total days).

Q5: How are leap years handled?
A: The calculator uses exact day counts, so leap days are automatically accounted for in the day counts.