Insurance Cancellation Refund Calculator
Estimate what may be returned when a policy is cancelled. The calculator compares pro-rata and short-rate treatment, then reconciles the result against payments and nonrefundable fees.
Estimated refund$724.93
- Estimated balance due
- $0.00
- Cancellation earned premium
- $475.07
- Unearned premium
- $724.93
- Unused policy days
- 245
- Pro-rata refund comparison
- $805.48
Cancellation refund breakdown
| Item | Amount |
|---|---|
| Pro-rata earned premium | $394.52 |
| Cancellation earned premium | $475.07 |
| Refundable payments made | $1,200.00 |
| Nonrefundable fees applied | $0.00 |
| Extra retained versus pro rata | $80.55 |
| Total retained including fees | $475.07 |
Days in force are capped at the policy term for the calculation.
Nonrefundable fees are capped at the total amount paid before the refund is estimated.
How to use this calculator
- Enter the full-term premium for the policy, excluding separately stated fees.
- Enter the policy term and the number of days the policy was in force.
- Choose the cancellation method and enter any short-rate or minimum-earned provision.
- Enter what has been paid so far and any fees the policy says are nonrefundable.
How the refund is calculated
An insurance cancellation refund starts with earned premium: the part of the premium the insurer keeps for the time coverage was in force. The calculator caps days in force at the policy term, so a late cancellation cannot create more than a fully earned policy.
The basic pro-rata earned premium is:
pro-rata earned premium = full-term premium × days in force ÷ policy-term days
For a pro-rata cancellation, the unearned part is returned without a short-rate charge. For a short-rate cancellation, this tool applies the entered penalty to the otherwise unearned premium:
short-rate unearned premium = pro-rata unearned premium × (1 − penalty ÷ 100)
method earned premium = full-term premium − method unearned premium
If the policy has a minimum-earned provision, the calculator compares the method result with that minimum and uses the larger amount, capped at the full-term premium. The estimated refund is then based on refundable payments, not simply the full policy premium:
refundable payments = total paid − nonrefundable fees
estimated refund = max(refundable payments − cancellation earned premium, 0)
balance due = max(cancellation earned premium − refundable payments, 0)
What moves the result
The number of covered days usually matters most because it determines the ordinary earned and unearned premium. A short-rate penalty lowers the return of the unused premium, while a minimum-earned premium can override the day-count result early in the policy term. The amount paid to date also matters: a policy can have unearned premium and still show no refund if installments paid so far are less than the earned premium.
What this calculator leaves out
The estimate does not apply a carrier's filed short-rate table, state-specific cancellation rules, premium-finance charges, audit adjustments, taxes, endorsements, commissions, or rounding rules. It also does not decide whether a fee is legally refundable. Use the policy form, cancellation endorsement, billing statement, and any state-required notice to confirm the actual calculation.
Worked example
Suppose a one-year policy has a $1,200 premium and is cancelled after 120 days. The pro-rata earned premium is $1,200 × 120 ÷ 365, or $394.52, leaving 245 unused days.
With a 10% short-rate penalty, the pro-rata unearned premium is $805.48 and the short-rate unearned premium is 90% of that amount, or $724.93. The cancellation earned premium is $475.07. If the insured paid $1,200 and had no nonrefundable fees, the estimated refund is $724.93. The pro-rata refund comparison is $805.48, so the extra retained versus pro rata is $80.55.
Common questions
What is the difference between pro-rata and short-rate cancellation?
Pro-rata cancellation keeps premium only for the time coverage was in force. Short-rate cancellation keeps that earned premium plus an added charge, often because the insured requested cancellation before the policy term ended.
Why is my refund smaller than the unused part of the policy?
A short-rate penalty, a minimum-earned premium, or nonrefundable fees can reduce the amount returned. The calculator also compares the earned premium with what has actually been paid, so unpaid installments can reduce the refund or create a balance due.
What does 90% of pro rata mean?
A common short-rate convention returns 90% of the otherwise unearned premium. In this calculator that is the same as entering a 10% short-rate penalty.
When does a minimum-earned premium apply?
A minimum-earned premium applies when the policy says the insurer may keep at least a stated percentage or amount after coverage starts. It matters most near the beginning of a term, when the ordinary day-count earned premium may be small.
Why might I owe a balance after cancelling?
A balance due can happen when the cancellation earned premium is greater than the refundable payments made so far. This is common when the policy was paid in installments or when fees were paid but are not refundable.