Short-rate cancellation refers to the process of terminating an insurance policy before its expiration date, where the insured is refunded a portion of the premium that is less than the proportion of coverage used. This method is often utilized by insurers to compensate for the administrative costs associated with policy cancellations and can result in a financial penalty for the insured. It's an important aspect of policy terms and conditions, as it directly impacts how much an insured party may receive if they choose to cancel their coverage early.
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