What Does Prorate Mean With Auto Insurance?

Make sure your new purchase is fully protected from day one.

Make sure your new purchase is fully protected from day one.

Not all of your life changes take place at a convenient time. When you make a change to your auto insurance, you might need to do it in the middle of your billing cycle. If the change you make impacts your insurance cost, then your insurance company will prorate your premium. Your premium is how much you pay for your insurance policy. Depending on the change you make, your insurance company will raise or lower your premium for the remainder of your billing cycle. If you’re ending your policy, they will refund any overage that you’ve paid.

Prorating Policy Changes

If you make significant changes to your auto insurance policy that result in a change to your premium, your insurance company may prorate your premium for the remainder of your policy. For example, if you have basic coverage on your car, you may decide to upgrade to comprehensive coverage. You’ve already paid $600 for six months of basic coverage, and you have three months left on your policy. If the additional coverage is an additional $300 for six months, then you would pay $150 to cover the last three months on your policy. When you pay your next six months, you would pay the new total of $900. If you downgrade your coverage, then your insurance company would owe you a refund for any overage you’ve paid.

Starting a New Policy

If you’re starting a brand new policy with an insurance company, you won’t have a prorated premium. If you’re transferring your coverage from an old car to a new one, but you're staying with the same insurance company, you might have a prorated premium. This will happen if there’s a change in the cost of your insurance. A newer car may be more expensive to insure. If it’s a brand new car, then your insurance company may require that you carry more coverage than you currently have. If you’re shopping for a new car and know what you want, you may want to contact your insurance company to find out how the purchase will change your premium.

Prorated Refunds

When you cancel your policy before the end of your billing period, you may be entitled to a refund, especially if you pay quarterly, semi-annually or annually. Use caution when canceling your auto insurance policy, though. Most states require that you carry some form of auto insurance, so make sure that if you’re switching policies, the new one is effective as soon as you cancel your old one. Depending on the insurance carrier, you may need to make your cancellation request in writing. Once they process your request, they will send you a check for any premium refunds that are due.


About the Author

Melinda Hill Sineriz has been writing professionally for over 10 years. She worked as an editorial assistant for Forward Movement Publications in Cincinnati, Ohio. She wrote for several years for allmusic.com and edited and wrote a chapter for a book with Wooster Press. She graduated from Miami University in Ohio with a Bachelor of Arts in English. She has a master's degree in teaching.

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