1. What is a Prorate Calculator for Return Premiums?

Definition: This calculator determines the refund amount (return premium) when an insurance policy is cancelled before its expiration date.

Purpose: It helps insurance professionals and policyholders calculate fair refunds based on the unused portion of the policy term.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• \( RP \) — Return premium (USD)
• \( P \) — Total premium paid (USD)
• \( T_u \) — Unused term (days)
• \( T_{total} \) — Total policy term (days)

Explanation: The formula calculates the proportional refund by multiplying the total premium by the ratio of unused days to total days.

3. Importance of Return Premium Calculation

Details: Accurate proration ensures fair refunds for cancelled policies and helps maintain transparency in insurance transactions.

4. Using the Calculator

Tips: Enter the total premium paid, unused term in days, and total policy term in days. All values must be > 0 and unused term ≤ total term.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between short rate and prorate cancellation?
A: Prorate refunds are proportional to time, while short rate includes a penalty for early cancellation.

Q2: How do I determine the unused term?
A: Subtract the cancellation date from the policy expiration date to get remaining days.

Q3: Does this apply to all insurance policies?
A: Most policies use proration, but check your specific policy terms as some may use different cancellation methods.

Q4: What if my policy has installment payments?
A: This calculator works with total premium. For installment policies, you may need to adjust for paid/unpaid portions.

Q5: Are there any fees deducted from the return premium?
A: This calculates gross return premium. Some policies may deduct administrative fees from the final refund.