What is a prorata premium?

I have a query -
1- What is a prorata premium?
2- Suppose I wanted to cover my car from 1 Feb'2010 to 31 July'2010, how the insurance company calculates prorata premium?

Thanks in advance!
Vipul

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Originally Posted by Vipul

I have a query -
1- What is a prorata premium?

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Prorata premium is the premium taken only for the short period; for which proposer is looking for cover.

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2- Suppose I wanted to cover my car from 1 Feb'2010 to 31 July'2010, how the insurance company calculates prorata premium?

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Period of cover 1 Feb'2010 to 31 July'2010
Suppose Annual Car Premium = 5000
Now prorata premium = 181 days at 5000/365 a day
= 181*5000/365
= 2479.45

Pro Rata Premium
This is a premium based on the length of time the insurer was actually at risk. Usually it is used to describe the few days that fall within the month before payment of the premium started.
Example:
Cover on a policy or item start on 20 June. The monthly premium for the item/policy is Rs 500. The pro rata premium for June is calculated as follows:

Rs 500 divided by 30 (days in the month) and multiplied by 11 (remaining days in June). The pro rata premium would be Rs 183.33.

Source - www.insurance.za.org

According to me, in prorata premium a rate charged for a period of insurance cover shorter than the normal period. This type of insurance premiums is charged on a monthly basis, while people take out insurance at any time during any given month, and this insurance takes effect immediately.

1. What is Prorata Premium?
This is a premium based on the length of time the insurer was actually at risk. Usually it is used to describe the few days that fall within the month before payment of the premium started.

2. How is prorata premiul calculated?
The insurance company calculates the annual premium for adding the new car based on information such as the year, make, model of the car, garage location, vehicle cost and miles driven. After determining the annual premium, the insurance company charges the ABC Company the pro rata premium from August 24 to December 31.