Premium Proration Calculator
When a policy starts or ends partway through its term, the premium is prorated so you pay only for the days you are covered. This calculator splits a full-term premium into the earned portion (days already elapsed) and the unearned portion (days remaining), and shows the pro-rata premium for a partial period. Use it for mid-term endorsements, cancellations, and refunds.
Proration formula
Daily rate = full-term premium / term length
Earned premium = full-term premium * days elapsed / term length
Unearned premium = full-term premium - earned premium
Days elapsed are capped at the term length so the earned premium never exceeds the full premium. The unearned premium is the pro-rata refund on cancellation.
Reading the result
- Earned premium is the part the insurer keeps for cover already provided.
- Unearned premium is the pro-rata refund for the days not yet covered.
- The daily rate is the premium spread evenly across the term.
- Short-rate cancellation would refund less than the pro-rata unearned figure.
Premium proration: frequently asked questions
What is premium proration?
Premium proration splits an insurance premium in proportion to the part of the policy term covered. If you start or cancel a policy partway through the term, the premium is prorated so you pay only for the days of cover you receive. It is the standard pro-rata method used for mid-term changes.
How is the pro-rata premium calculated?
Multiply the full-term premium by the number of days covered, then divide by the total number of days in the term. For a 365-day policy at a 1,200 premium covering 90 days, the pro-rata premium is 1,200 times 90 divided by 365, about 295.89.
What are earned and unearned premium?
Earned premium is the portion that corresponds to coverage already provided, calculated pro-rata on the days elapsed. Unearned premium is the remainder, the part the insurer would refund on cancellation. This calculator shows both based on the days elapsed you enter.
Is pro-rata the same as short-rate cancellation?
No. Pro-rata refunds the exact unearned portion. Short-rate cancellation, sometimes applied when the policyholder cancels early, keeps an extra penalty so the refund is smaller than pro-rata. This calculator uses the straight pro-rata method.
Sources and method
- Proration is the straight pro-rata identity: premium scaled by the fraction of the term covered. All inputs are user-editable; no figure is hardcoded.
- National Association of Insurance Commissioners: NAIC for cancellation and unearned-premium concepts.
Reviewed by the CalculatorHub team, edited by James Graham, 19 June 2026. See our methodology.