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Short-Rate Cancellation Calculator

Calculate short-rate return premium using a penalty percentage or the traditional short-rate table, compared with pro-rata.

How the short-rate cancellation calculator works

When an insured cancels early, many policies allow the carrier to keep more than the pro-rata earned premium to cover its up-front costs. This is the short-rate method — either a percentage penalty or a traditional table.

Formula

Penalty method: Return = Pro-rata return × (1 − Penalty %). Table method: Return = Premium × (1 − Table earned % for days in force).

How to use it

  1. Enter the annual premium and policy dates.
  2. Enter the cancellation date.
  3. Choose the penalty or table method.

Worked example

A $6,500 policy cancelled after 152 days: pro-rata return $3,793, with a 10% short-rate penalty the return is $3,413.84.

Frequently asked questions

Is short-rate legal in every state?

Most states allow it for insured-requested cancellations when the policy provides for it; some lines and states restrict it.

Which table should I use?

The one referenced in the policy. The traditional annual table shown here is a common reference; always check the policy form.

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