Enter your annual premium, policy duration, and months used into the calculator to determine your pro rata premium.

Pro Rata Premium Calculation Formula

The following formula is used to calculate the pro rata premium from your annual premium. 

Pro Rata Premium = (Annual Premium / Policy Duration) * Months Used

Variables:

  • Pro Rata Premium is the premium amount for the used duration ($)
  • Annual Premium is the total premium amount for the entire policy period ($)
  • Policy Duration is the total duration of the policy (months)
  • Months Used is the number of months the policy was used (months)

To calculate the pro rata premium, divide the annual premium by the policy duration to get the monthly premium, then multiply the result by the months used.

What is Pro Rata Premium Calculation?

Pro rata premium calculation refers to the process of determining the premium amount for a fraction of the policy period based on the full premium amount. This is particularly useful when a policy is canceled before the end of the term, and the premium needs to be adjusted for the actual period covered. Proper pro rata premium calculation ensures accurate refunds or additional charges, maintaining fairness for both the insurer and the insured.

How to Calculate Pro Rata Premium?

The following steps outline how to calculate the pro rata premium using the given formula.

  1. First, determine your annual premium and the total policy duration in months.
  2. Next, determine the number of months the policy was actually used.
  3. Use the formula from above: Pro Rata Premium = (Annual Premium / Policy Duration) * Months Used.
  4. Finally, calculate the pro rata premium by plugging in the values.
  5. After inserting the variables and calculating the result, check your answer with the calculator above.

Example Problem:

Use the following variables as an example problem to test your knowledge.

Annual Premium = $1,200

Policy Duration = 12 months

Months Used = 3 months

FAQ

1. What is pro rata premium?

Pro rata premium is the portion of the total premium that corresponds to the period the insurance coverage was actually in effect.

2. How is pro rata premium different from short-rate premium?

While pro rata premium is calculated based on the exact period the coverage was in effect, short-rate premium typically involves a penalty for early cancellation, resulting in a higher premium than the pro rata amount.

3. When should I use the pro rata premium calculator?

It’s helpful to use the pro rata premium calculator whenever you need to determine the premium for a partial policy period, such as in cases of early cancellation or changes in policy terms.

4. Can this calculator be used for different types of insurance?

Yes, you can use this calculator for various types of insurance policies, including auto, health, and property insurance, as long as you have the necessary premium and policy duration details.

5. Is the calculator accurate?

The calculator provides an estimate of your pro rata premium based on the inputs provided. For exact figures, it’s best to consult your insurance policy or contact your insurance provider.