Short Rate CancellationCalculator

How short rate cancellation works

When you cancel an insurance policy before its renewal date, most Canadian insurers refund you on a short ratebasis rather than a straight day-by-day split. They keep an “earned” percentage of your annual premium that is a little higher than the portion of the year you actually used, and refund the rest. The earlier you cancel, the more premium the insurer has not yet earned — but also the larger the small penalty built into the short rate schedule.

This calculator looks up your insurer's short rate table for the number of days your policy was in force, applies the earned percentage to your premium, and shows the refund you can expect. For the full day-by-day schedule, see our short rate table.

Earned percentage vs the actual penalty

Two numbers often get confused. The earned percentage is the share of your premium the insurer keeps — it starts in the single digits and climbs all the way to 100% in the final days before renewal. The penalty is something smaller: the gap between the short rate refund and a simple pro-rata refund. On the standard Canadian table that gap rarely exceeds about 8% of your annual premium, and it shrinks the closer you get to renewal.

Worked example: cancel a $1,200 policy at 90 days and the insurer has earned about 31% — it keeps $372 and refunds $828. A pure pro-rata refund would have returned about $904, so the short rate penalty in this case is roughly $76.

When you can avoid the penalty

You may qualify for a penalty-free pro-rata refund — paying only for the days you used — in situations such as:

• ✓ You sell your vehicle or home and no longer need the coverage
• ✓ Your vehicle or property is a total loss
• ✓ You move out of province
• ✓ The insurer cancels the policy, or you switch to another product with the same insurer

Always ask your insurer or broker whether your reason qualifies for pro-rata treatment before you confirm — it is the single biggest factor in how much you get back.