ACCREDITED CONTINUING EDUCATION & ONLINE INSURANCE COURSES FOR FUNDAMENTALS OF INSURANCE, CAIB*, RIBO**, ALBERTA GIL & OTHERS

May 31, 2017

Last Updated on November 16, 2021 by info@pnclearning.com

There are 2 types of cancellations (ignoring flat rate), they are: pro rata and short rate.

1. A pro rata cancellation is a full refund of any unearned premiums. This amount is proportional to the amount of time remaining on the policy. For example, if an insured pays a premium of $12,000 for the year, but the policy is cancelled after 6 months on a pro-rata basis, the insurer returns $6000 to the insured—50% of the policy remaining means 50% of the premium is refunded.

2. A short rate cancellation is the same as a pro rata refund minus some administrative costs or minimum retained premium.

Pro rata cancellations are applied when the insurer cancels the policy. This usually happens because of some material change in circumstances and the insurer doesn’t feel comfortable staying on the policy. On the other hand, short rate cancellations are applied when the insured opts to cancel the policy mid-term.

Generally, there is no way to avoid a short rate cancellation and its associated penalties if you are opting to cancel the policy of your own volition. There are, however, some insurance companies, such as Intact Insurance, that will let you do a pro rata cancellation even when you opt to cancel.

Jacques Wong is the CEO and Director of Education at PNC Learning. An award-winning licensed insurance broker with over 15 years of experience in both education and the insurance industry, Jacques is recognized for his expertise and effective communication strategies. He achieved the highest provincial scores on his CAIB* 3 and CAIB* 4 exams and contributes to leading insurance publications. Jacques is dedicated to making insurance knowledge accessible for everyone through his unique approach and online content.

Jacques Wong

 Jacques wong

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