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Prorated Premium Calculator

Formula

The formula to calculate the Prorated Premium (P_p) is:

$P_p = \left(\frac{P_t}{T_t}\right) \times T_p$

Where:

$P_p$ is the Prorated Premium
$P_t$ is the Total Premium
$T_t$ is the Total Policy Period in Days
$T_p$ is the Prorated Period in Days

What is a Prorated Premium?

A prorated premium is the amount of premium that is calculated based on the actual period of coverage within the total policy period. This is often used when a policy is canceled before its expiration date or when coverage starts mid-term. The prorated premium ensures that the policyholder only pays for the coverage period they actually use.

Example Calculation

Let's assume the following values:

Total Premium (P_t) = $1,200
Total Policy Period (T_t) = 365 days
Prorated Period (T_p) = 120 days

Using the formula to calculate the Prorated Premium:

$P_p = \left(\frac{1200}{365}\right) \times 120 \approx 394.52$

The Prorated Premium is approximately $394.52.