Three different calculation methods are commonly used. Cancellation methods are typically calculated using an online wheel calculator, a type of circular
slide rule.
Pro rata A non-penalty method of calculating the return premium of a canceled policy. A return premium factor is calculated by taking the number of days remaining in the policy period divided by the number of total days of the policy. This factor is multiplied by the
written premium to arrive with the return premium.
Short Period Rate (old short rate) A penalty method of calculating the return premium often used when the policy is canceled at the insured's request. It uses a table of factors that results in penalties that can be lower or higher than
short rate (90% pro rata) depending upon the date of cancellation.
Short Period Rate (90% pro rata) A penalty method where the penalty is 10% of the unearned premium. ==Policy term==