The pro rata insurance calculator helps determine the fair refund amount for an insurance policy that is cancelled mid-term.
"Pro rata" is a Latin term meaning "in proportion". In the context of insurance, it means that the premium is adjusted proportionally
to the time the policy was in effect or the time remaining. This calculator assists policyholders and insurers in calculating
the refund due when a policy is terminated before its scheduled expiration date.
How it Works:
The fundamental principle is to calculate the cost of the insurance per day and then multiply it by the number of days the policy
was not in effect or the number of days remaining in the policy term.
Key Inputs:
Total Premium Amount: The full cost of the insurance policy for its entire term.
Policy Start Date: The date the insurance coverage officially began.
Policy End Date: The date the insurance coverage was originally scheduled to end.
Cancellation Date: The date the policy is terminated or the date coverage ceases.
Policy Term Days (Optional): The total number of days the policy was intended to cover. This can be calculated automatically if left blank.
The Calculation:
The calculator performs the following steps:
Determine Policy Term in Days:
If 'Policy Term Days' is not provided, the number of days between 'Policy Start Date' and 'Policy End Date' is calculated.
This is the total duration for which the premium was paid.
Formula: Policy Term Days = End Date – Start Date (in days)
Calculate Daily Premium:
The total premium is divided by the total number of days in the policy term to find the cost per day.
Formula: Daily Premium = Total Premium Amount / Policy Term Days
Determine Unused Days:
The number of days remaining in the policy from the cancellation date until the original end date is calculated.
Formula: Unused Days = Policy End Date – Cancellation Date (in days)
Calculate Pro Rata Refund:
The daily premium is multiplied by the number of unused days to determine the refund amount.
Formula: Pro Rata Refund = Daily Premium * Unused Days
Example Calculation:
Let's say you have an annual comprehensive car insurance policy with the following details:
Total Premium: $1200
Policy Start Date: 2023-01-15
Policy End Date: 2024-01-14
Cancellation Date: 2023-07-01
Step 1: Policy Term Days
The policy term is 365 days (from Jan 15, 2023, to Jan 14, 2024).
Step 2: Daily Premium
Daily Premium = $1200 / 365 days ≈ $3.2877 per day.
Step 3: Unused Days
From July 1, 2023, to January 14, 2024, there are 197 days remaining.
Step 4: Pro Rata Refund
Pro Rata Refund = $3.2877/day * 197 days ≈ $647.68
Therefore, you would be eligible for a refund of approximately $647.68 for the unused portion of your insurance policy.
Note: Some insurance policies may have specific clauses regarding cancellation fees or minimum retained premiums, which could affect the final refund amount. Always refer to your policy documents for precise terms and conditions.
function calculateProRata() {
var premiumAmount = parseFloat(document.getElementById("premiumAmount").value);
var startDateStr = document.getElementById("startDate").value;
var endDateStr = document.getElementById("endDate").value;
var cancellationDateStr = document.getElementById("cancellationDate").value;
var policyTermDaysInput = document.getElementById("policyTermDays").value;
var resultDiv = document.getElementById("result");
resultDiv.style.backgroundColor = "var(–primary-blue)"; // Reset to default or indicate processing
if (isNaN(premiumAmount) || premiumAmount <= 0) {
resultDiv.innerText = "Please enter a valid total premium amount.";
return;
}
if (!startDateStr || !endDateStr || !cancellationDateStr) {
resultDiv.innerText = "Please enter valid start, end, and cancellation dates.";
return;
}
var startDate = new Date(startDateStr);
var endDate = new Date(endDateStr);
var cancellationDate = new Date(cancellationDateStr);
if (isNaN(startDate.getTime()) || isNaN(endDate.getTime()) || isNaN(cancellationDate.getTime())) {
resultDiv.innerText = "Invalid date format. Please use YYYY-MM-DD.";
return;
}
if (cancellationDate < startDate || endDate < startDate || endDate < cancellationDate) {
resultDiv.innerText = "Date sequence is incorrect. Ensure Start Date <= Cancellation Date 0) {
policyTermDays = parseFloat(policyTermDaysInput);
} else {
var timeDiff = endDate.getTime() – startDate.getTime();
policyTermDays = Math.round(timeDiff / (1000 * 3600 * 24));
}
if (policyTermDays <= 0) {
resultDiv.innerText = "Policy term must be at least one day.";
return;
}
var dailyPremium = premiumAmount / policyTermDays;
var timeDiffUnused = endDate.getTime() – cancellationDate.getTime();
var unusedDays = Math.round(timeDiffUnused / (1000 * 3600 * 24));
if (unusedDays endDate) {
resultDiv.innerText = "Cancellation date cannot be after the policy end date for a refund calculation.";
return;
}
var proRataRefund = dailyPremium * unusedDays;
// Apply rounding to two decimal places for currency
proRataRefund = Math.round(proRataRefund * 100) / 100;
if (isNaN(proRataRefund)) {
resultDiv.innerText = "Calculation error. Please check your inputs.";
} else {
resultDiv.innerText = "Pro Rata Refund: $" + proRataRefund.toFixed(2);
resultDiv.style.backgroundColor = "var(–success-green)";
}
}