# Short-rate cancellation

> Short-rate cancellation explained: when an insurer keeps part of your unearned premium after you cancel early, versus a full pro rata refund.

Canonical page: https://statecover-guide.com/glossary/short-rate-cancellation/  
Last reviewed: October 28, 2026 by the StateCover Guide editorial team  
General information, not legal or insurance advice.

## Quick answer

Short-rate cancellation is a way of calculating your refund in which the insurer keeps part of your unearned premium when you cancel a policy before its term ends. The result is a smaller refund than a pro rata refund, which returns the full unused share of the premium.

## How it works

Unearned premium is money you paid in advance for coverage you have not received yet. When a policy is canceled:

- **Pro rata:** you get back the full unearned portion, in proportion to the time left.
- **Short rate:** the insurer keeps part of the unearned portion, so the refund is less than pro rata. It works like an early cancellation charge.

Example: you pay $1,200 for a 12-month policy and cancel after three months. A pro rata refund is $900. Under a short-rate provision, the refund would be less than $900.

## State rules

States limit short-rate refunds in different ways:

- **Texas** now requires the full unearned premium, calculated pro rata, to be refunded when a personal auto policy is canceled, which in effect bars short-rate provisions. Insurers may still keep a minimum retained premium for costs of issuing the policy that they cannot recover.
- **Florida** bars short-rate tables that return less than 90% of the pro rata unearned premium, unless the insurer provides actuarial or other justification.

If you plan to switch insurers before your term ends, ask your current company how it calculates cancellation refunds and whether any fees apply.

## Related terms

- [Cancellation](https://statecover-guide.com/glossary/cancellation/)
- [Policy term](https://statecover-guide.com/glossary/policy-term/)
- [Premium](https://statecover-guide.com/glossary/premium/)
- [Reinstatement](https://statecover-guide.com/glossary/reinstatement/)
- Guide: [Car insurance quotes at renewal](https://statecover-guide.com/saving/shopping-at-renewal/)

## Sources

- [Texas Department of Insurance, Adopted amendments to 28 TAC §5.7015 (unearned premium refunds)](https://tdi.texas.gov/rules/2025/documents/20269730.pdf) — definition of a short rate provision and the pro rata refund requirement
- [Florida Administrative Code, Rule 69O-170.010](https://myfloridacfo.com/docs-sf/consumer-services-libraries/consumerservices-documents/understanding-coverage/consumer-guides/69o-170-010.pdf) — limits on short-rate cancellation tables