Car Insurance Refund Calculator

How it works

An insurer does not earn your premium the day you hand it over. It earns it a day at a time, across the term, in exchange for carrying your risk. Cancel halfway through and the days you paid for but never used are still yours.

That share is called the unearned premium, and it is the pot every refund comes out of. What you actually receive is that pot, minus a short-rate penalty if your policy charges one:

• premium — the total you paid up front for the term
• term — the length of the policy in months
• unused — the months left, term minus the months you used
• short-rate % — the slice of the unearned premium the insurer keeps, 0 for a pro-rata cancellation

With the defaults above, you paid $1,320 for six months and used 2.5 of them, so the insurer has earned $550 and the remaining 3.5 months, worth $770, are unearned. Cancel pro-rata and that whole $770 comes back. Switch to a 10% short-rate cancellation and the insurer keeps $77 of it, leaving $693.

✓ Every result is checked against independent reference math. See how we test the calculators →

A worked example: cancelling a $1,320 six-month policy

Say you paid $1,320 up front for a six-month car insurance policy, then sold the car two and a half months in. That leaves 3.5 months you paid for and will never use. Cancel pro-rata and your refund is $770.

The split is straightforward. Of the $1,320 you handed over, the insurer has earned $550 for the two and a half months it actually carried your risk. The other $770 is unearned premium, money sitting against days that will now never happen, and pro-rata means every cent of it comes back to you.

Now suppose your policy cancels short-rate instead, which is common when you are the one walking away. A 10% short-rate penalty holds back $77 of the unearned premium, and the refund drops to $693. The insurer keeps that slice to recover what it cost to write a policy you did not keep.

It is not a huge sum here, but it is the entire difference between the two methods, and your policy’s cancellation clause decides which one applies to you. Enter your own premium, term, and months used above to see where you land.

Pro-rata or short-rate: which one you get

Every refund starts from the same unearned premium. What happens to it next depends on which of two methods your policy names, and the gap between them is the whole reason this page exists.

• Pro-rata. You get back exactly the unused share, to the day, with nothing held back. This is what you get when the insurer cancels you, and when your state’s rules or the policy wording require it. Many personal auto policies are pro-rata for precisely that reason.
• Short-rate. The insurer keeps an extra slice of the unearned premium before refunding the rest. It typically applies when you are the one cancelling early.

Short-rate is not a punishment, even though it feels like one. Writing a policy costs real money in commission, underwriting, and administration, and the insurer priced those costs across the full term you agreed to. Cancel at month two of six and it never earns them back, so it recovers part of them from the refund.

Knowing which method applies to you is worth more than any estimate here, so read the cancellation clause before you assume the pro-rata number is yours.

Cancel properly, or it follows you

How you cancel matters more than the refund does, because the wrong exit costs you for years afterward and no refund is big enough to cover it.

• Never cancel by simply not paying. It feels like the quiet way out, but the policy does not end, it lapses. Insurers treat a gap in coverage as a risk signal and price it into every quote you get afterward, at every company, for years. The refund you were chasing is trivial next to that.
• Cancel in writing, with a specific effective date. A phone call with no paper trail is how people end up billed for a month they thought they had ended. Name the date, and ask for written confirmation that the policy closed on it.
• Never cancel the old policy before the new one is in force. Set the new policy’s start date first, then end the old one on that same day.

That last point is the one people get wrong. Even a single day of daylight between two policies is a coverage lapse, and it is the sort of thing insurers ask about and price against for years. Overlapping by a day costs you a rounding error.

A gap of a day can cost you real money on every renewal you have.

When the refund is smaller than you expect, or zero

The math above assumes you handed over the whole term’s premium at the start. Plenty of people have not, and a few other things trim the number besides.

• You paid monthly. Then there may be little or nothing to refund, and that is not a mistake. You were paying as you went, so on the day you cancel you have already consumed most of what you handed over. Some monthly plans bill a month ahead, which leaves a small credit rather than a real refund.
• Fees and financing. Some insurers charge a flat cancellation fee. And if you financed the premium through a third party, the refund goes to the finance company first, not to you.
• Proof and timing. Sold the car? Cancel the day the title transfers, not before, and have the paperwork ready.

Rules vary by state and by policy. Some states restrict short-rate cancellation on personal auto, some cap what the penalty can be, and most require a pro-rata refund whenever the insurer is the one cancelling. Your policy’s cancellation clause, read alongside your state’s rules, is the authority.

Treat the figure here as the shape of the answer, and use it to check theirs.