Short Rate Cancellation
Definition. Short Rate is a non-pro-rata cancellation formula where the carrier keeps MORE than pro-rata — penalizes the insured for cancelling mid-term.
Also known as: Short Rate Penalty
Typical short rate factor: 90% of unearned (rather than 100% pro-rata). For a $12K policy cancelled at 6 months, pro-rata refund = $6,000, short-rate refund = $5,400. Less common today than pure pro-rata cancellation.
Sources cited
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Reviewed by California-licensed Property & Casualty insurance agent
Jason Wootton (CA License #0I94454). Not insurance advice, an individual recommendation, or a solicitation in any state. Insurance regulations vary by state. For specific coverage decisions, consult a licensed insurance agent in your state.
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