Calculate earned insurance premiums and refund amounts based on proportional usage.
Calculation Results
Total Policy Days:
Days Used (Earned):
Days Remaining:
Daily Premium Rate: $
Refund (Unearned): $
Amount to be returned to the policyholder.
Earned Premium: $
Amount kept by the insurer.
Understanding Pro Rata Premium Calculations
In the insurance industry, "Pro Rata" refers to the method of calculating premiums or refunds based precisely on the number of days a policy was in force. This is considered the fairest method for mid-term cancellations because it does not include "short-rate" penalties.
The Pro Rata Formula
To calculate the pro rata earned premium, the following formula is used:
Earned Premium = (Total Premium / Total Number of Days in Policy) × Number of Days Elapsed
The remaining amount (Total Premium minus Earned Premium) is known as the Unearned Premium, which is usually the refund amount due to the policyholder.
Practical Example
Imagine a policy with the following details:
Total Premium: $1,200
Policy Term: January 1st to December 31st (365 days)
Pro rata calculations are most commonly used when:
An insurer cancels a policy (e.g., for underwriting reasons).
A policy is updated mid-term (adding a vehicle or changing coverage limits).
In certain jurisdictions where "short-rate" fees are legally prohibited.
function calculateProRata() {
var totalPremium = parseFloat(document.getElementById('totalPremium').value);
var startVal = document.getElementById('startDate').value;
var endVal = document.getElementById('endDate').value;
var cancelVal = document.getElementById('cancelDate').value;
var errorDiv = document.getElementById('error');
var resultsDiv = document.getElementById('results');
// Reset UI
errorDiv.style.display = 'none';
resultsDiv.style.display = 'none';
// Validation
if (isNaN(totalPremium) || totalPremium <= 0) {
showError("Please enter a valid premium amount.");
return;
}
if (!startVal || !endVal || !cancelVal) {
showError("Please select all three dates.");
return;
}
var startDate = new Date(startVal);
var endDate = new Date(endVal);
var cancelDate = new Date(cancelVal);
if (endDate <= startDate) {
showError("Expiration date must be after the start date.");
return;
}
if (cancelDate endDate) {
showError("Cancellation date cannot be after the policy expiration date.");
return;
}
// Calculation Logic
var timeDiffTotal = Math.abs(endDate.getTime() – startDate.getTime());
var totalDays = Math.ceil(timeDiffTotal / (1000 * 3600 * 24));
var timeDiffUsed = Math.abs(cancelDate.getTime() – startDate.getTime());
var daysUsed = Math.ceil(timeDiffUsed / (1000 * 3600 * 24));
// In some contexts, 0 days used is possible if cancelled same day
if (daysUsed < 0) daysUsed = 0;
var daysRemaining = totalDays – daysUsed;
var dailyRate = totalPremium / totalDays;
var earnedPremium = dailyRate * daysUsed;
var unearnedPremium = totalPremium – earnedPremium;
// Display Results
document.getElementById('resTotalDays').innerText = totalDays;
document.getElementById('resDaysUsed').innerText = daysUsed;
document.getElementById('resDaysRemaining').innerText = daysRemaining;
document.getElementById('resDailyRate').innerText = dailyRate.toFixed(4);
document.getElementById('resEarned').innerText = earnedPremium.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resRefund').innerText = unearnedPremium.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
resultsDiv.style.display = 'block';
}
function showError(msg) {
var errorDiv = document.getElementById('error');
errorDiv.innerText = msg;
errorDiv.style.display = 'block';
}