short rate penalty

Definition

A fee incurred when an insured cancels a policy during a coverage period. The penalty is deducted from any returned premium the insured is owed. For example, an auto policy may require a 10% short rate penalty on unearned premiums if a policy is cancelled by the insured with two weeks remaining during a quarterly coverage period.

Use short rate penalty in a sentence

State Farm Insurance charges a ten percent short rate penalty to customers who try to cancel their auto insurance early.

​ Was this Helpful? YES  NO 6 people found this helpful.

When my income was drastically reduced I decided the short rate penalty was more palatable than continuing to make payments I could not afford.

​ Was this Helpful? YES  NO 11 people found this helpful.

Our new workers' compensation insurance was still less expensive even after factoring in the short rate penalty incurred by cancelling our previous policy.

​ Was this Helpful? YES  NO 4 people found this helpful.

Show more usage examples...

Browse Definitions by Letter: # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
short rate short run