Definitions for "Short Rate Cancellation"
A cancellation by the insured that refunds the unearned premium minus administrative expenses.
This is a cancellation with a penalty. Generally when the insured cancels, it is on a short-rate basis. (Exceptoions: insured going into the military or when insured cancels and reinsures in the same company).
The basis that a refund/return premium is calculated when a policy is cancelled midterm at the policyholder's request. Generally, this is 90 percent of the pro-rata return premium, however, an insuring company may also calculate the percentage according to their own guidelines or rate schedules.