Question

an insurance policy was cancelled, the policy was in force for exactly 50% of the policy period, the insurance keeps 50% of the original premium this is called?

a. pro-rata

b. short rate

c. flat cancellation

d. partial reimbursement

Explanation:

• Pro - rata cancellation in insurance means the premium retained is proportional to the time the policy was in force. If the policy was in force for 50% of the period, the insurer keeps 50% of the premium (pro - rata).
• Short rate involves the insurer keeping more than the pro - rata share (a penalty for early cancellation).
• Flat cancellation usually means the policy is cancelled as if it never took effect, so the insurer keeps little to no premium.
• Partial reimbursement is a general term and not the specific insurance - related term for this proportional calculation.

Answer:

a. Pro - rata