What occurs during a pro-rate cancellation of an insurance policy?

What occurs during a pro-rate cancellation of an insurance policy?

• A. The policy is adjusted based on claims
• B. The insurer refunds part of the premium based on the time insured
• C. The insured chooses not to renew the policy
• D. The policy is canceled without penalty

Answer: (B)

During a pro-rate cancellation of an insurance policy, the insurer refunds part of the premium based on the time the policy was in effect. This means that if a policyholder cancels their insurance policy partway through the coverage period, they are entitled to receive a refund for the portion of the premium that covers the remaining time they will not be insured. The refund is calculated on a pro-rata basis, which takes into account the total premium and the number of days the policy was active compared to the total term of the policy. This method ensures that the insured only pays for the coverage they actually received. It emphasizes the fair treatment of policyholders by ensuring they're compensated for unused coverage.

During a pro-rate cancellation of an insurance policy, the insurer refunds part of the premium based on the time the policy was in effect. This means that if a policyholder cancels their insurance policy partway through the coverage period, they are entitled to receive a refund for the portion of the premium that covers the remaining time they will not be insured. The refund is calculated on a pro-rata basis, which takes into account the total premium and the number of days the policy was active compared to the total term of the policy. This method ensures that the insured only pays for the coverage they actually received. It emphasizes the fair treatment of policyholders by ensuring they're compensated for unused coverage.