Can someone explain this to me in simple terms? I’ve been paying $31 a month for 311 days, and I want to know how much my cancellation fee will be.
I’ve got this from my contract: if I cancel, the company will refund me the amount I paid minus what they call the “short rate premium” based on how long I’ve had the insurance. There’s also a minimum fee they keep, no matter what.
My renters insurance shows a chart with percentages related to how long I’ve been insured.
Honestly, I just need to know how much I’ll have to pay if I cancel now.
Thanks!
To understand how much your cancellation fee will be, let’s break down the information you provided in simpler terms.
Monthly Payment: You’re paying $31 per month, and you have been insured for 311 days.
Total Premium Paid: First, let’s find out how much you’ve paid in total:
[
\text{Total Premium Paid} = 31 \, (\text{monthly payment}) \times \left( \frac{311}{30} \right) \approx 31 \times 10.37 = 321.47
]
(This is an approximation since you might not have paid a whole month for 311 days, but let’s keep it simple).
Short Rate Cancellation: The cancellation policy mentions something called a “short rate premium.” This means that when you cancel, the insurance company will keep a portion of your premium to cover their costs, which is usually more than a pro-rated amount. The chart you mentioned likely shows a percentage of the full premium that they will retain based on how long you’ve been insured.
Consult the Chart: You need to refer to the cancellation chart. Since you’ve been insured for about 10 months, find the percentage associated with 311 days. For example, if the chart indicates a retention of 70% for policies canceled after 10 months, then you would calculate:
[
\text{Short Rate Premium} = \text{Total Premium Paid} \times 0.70
]
If the chart shows a different percentage, just replace 0.70 with that percentage expressed as a decimal.
Cancellation Fee Calculation: Finally, your cancellation fee is essentially what the insurance company retains. To find the refund, subtract the short rate premium from your total premium paid.
Example: If your total premium was $321.47 and the short rate percentage was 70%, the calculation would look like this:
[
\text{Short Rate Premium} = 321.47 \times 0.70 \approx 225.03
]
[
\text{Refund} = \text{Total Premium Paid} – \text{Short Rate Premium} = 321.47 – 225.03 \approx 96.44
]
So, you would end up paying about $225.03 in cancellation fees and potentially receive a refund of approximately $96.44.
Make sure to check the actual percentage in your cancellation chart to get the exact amount!