Hey there - Tony Smith here with Chrinco.com and today we're talking about
the refunds you receive when you cancel your insurance policy. Most home and
auto insurance policies will refund your unearned premium after you cancel
policy and they calculate the refund on a pro-rata basis. This simply means
that if you paid for a full year of insurance and you cancel your insurance
roughly six months into the policy, you'll receive a refund of roughly six
months of unearned premium.
But did you know that there are a couple other types of cancellation refunds
you should be aware of - one is called short rate and the other is called
minimum earned premium. A short rate cancellation is a type of cancellation
that is intended to disincentivize the insured from canceling the policy
before its normal expiration date. With a short-rate cancellation, the
insurance company is entitled to retain a larger percentage of the unearned
premium when compared with pro rata cancellation. Generally a short rate
cancellation schedule would be included in your policy. In these
situations, if you were to cancel roughly six months into a 12 month policy,
instead of receiving a 50% refund...you may only receive a 45% refund.
The other type of cancellation refund we're discussing today is minimum
earned premium. Often times, an insurance company will set a minimum earned
premium amount to serve to serve as a deterrent to early cancellation. The
minimum earned premium is typically set as a percentage of the total premium
and generally covers the a portion of costs associated with issuing a
policy. Like the short rate cancellation, the minimum earned premium
percentage would be noted in your policy, if applicable.
Keep in mind that these situations are not common to your standard home and
auto insurance policies, however, if you're seeking insurance in the surplus
lines market because you have a higher risk scenario....you'll want to ask
if there are any special cancellation provisions within the policy before
agree to purchase the policy.
Want to see what insurance rates look like in your area? Get a quote online
at shopitnow.chrinco.com or give me a call at 321-586-3754 - Chrinco.com -
Insurance Simplified!
