If you have ever had an insurance policy canceled before, you may have heard the terms “Pro-Rate” or “Short-Rate” Cancellation. These two terms are in reference to the type of cancellation and refund that will happen. Pro-Rate Cancellation is used when the company cancels your policy. It will generate your refund, without any penalty, for canceling during the policy period.
On the other had, when a policy is canceled due to non-payment, non-payment to a premium finance company, or by the insured’s request the company will use Short-Rate Cancellation. The refund on a Short-Rate cancellation will generate minus a penalty for canceling during the policy period. The penalty amount depends on your total premium and how much time is left on your policy when you cancel. With few exceptions, it is best to wait til the renewal date to change Companies.