Insurance Pro-rata Wheel Calculator

Insurance Pro-Rata Wheel Calculator

Calculation Summary

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Total Term Days: 0

Days in Force (Earned): 0

Pro-Rata Factor: 0%

Earned Premium: $0.00

Unearned (Refund) Premium: $0.00

function calculateProRata() { var premium = parseFloat(document.getElementById('totalPremium').value); var effDateStr = document.getElementById('effDate').value; var expDateStr = document.getElementById('expDate').value; var canDateStr = document.getElementById('canDate').value; if (!premium || !effDateStr || !expDateStr || !canDateStr) { alert('Please fill in all fields correctly.'); return; } var effDate = new Date(effDateStr); var expDate = new Date(expDateStr); var canDate = new Date(canDateStr); if (canDate expDate) { alert('Cancellation date cannot be after the expiration date.'); return; } var totalMs = expDate – effDate; var earnedMs = canDate – effDate; var totalDays = Math.round(totalMs / (1000 * 60 * 60 * 24)); var daysInForce = Math.round(earnedMs / (1000 * 60 * 60 * 24)); if (totalDays <= 0) { alert('Expiration date must be after the effective date.'); return; } var factor = daysInForce / totalDays; var earnedPremium = premium * factor; var unearnedPremium = premium – earnedPremium; document.getElementById('totalDaysText').innerText = totalDays; document.getElementById('daysInForceText').innerText = daysInForce; document.getElementById('factorText').innerText = (factor * 100).toFixed(4) + '%'; document.getElementById('earnedPremiumText').innerText = '$' + earnedPremium.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('refundText').innerText = '$' + unearnedPremium.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('prorataResult').style.display = 'block'; }

What is an Insurance Pro-Rata Wheel?

The Insurance Pro-Rata Wheel is a fundamental tool used by insurance underwriters, agents, and auditors to determine the exact amount of premium earned by an insurance company when a policy is cancelled before its natural expiration date. Traditionally, this was a physical circular slide rule (the "wheel"), but modern digital calculators have replaced the manual process for higher precision.

How Pro-Rata Calculation Works

Pro-rata cancellation means that the insurer only keeps the portion of the premium that corresponds to the time the coverage was actually in force. No "short-rate" penalties are applied. The formula is linear:

• Total Days: The number of days between the effective date and expiration date.
• Days in Force: The number of days the policy was active until the cancellation date.
• Earned Premium: (Days in Force ÷ Total Days) × Total Premium.
• Unearned (Refund) Premium: Total Premium – Earned Premium.

When to Use a Pro-Rata Calculator

Pro-rata calculations are typically used in the following scenarios:

1. Insurer Cancellation: When the insurance company cancels a policy (e.g., for underwriting reasons), they are legally required in most jurisdictions to refund premium on a pro-rata basis.
2. Endorsements: When coverage is added or removed mid-term, the additional or return premium is calculated pro-rata.
3. Flat Cancellations: Determining if a refund is owed when a policy is cancelled back to the inception date.

Practical Example

Imagine a business owner pays $3,650 for a one-year policy starting January 1st. On July 1st (181 days into the term), the business is sold and the policy is cancelled.

The calculator determines there are 365 total days in the term. Since the policy was active for 181 days, the earned factor is approximately 49.58%. The insurer would keep $1,809.67 (Earned Premium) and return $1,840.33 to the policyholder.

Note on Leap Years: This digital pro-rata wheel automatically accounts for leap years by calculating the precise number of days between the calendar dates provided.