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Short Rate Formula:
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The Ontario Short Rate Cancellation method is used to calculate refunds when an insurance policy is cancelled before its expiration date. It provides a standardized way to determine the refund amount based on the premium paid and the Ontario short rate fraction.
The calculator uses the Ontario short rate formula:
Where:
Explanation: The formula calculates the refund by subtracting the short rate penalty from the original premium.
Details: Accurate short rate calculation is crucial for insurance companies and policyholders to determine fair refund amounts when policies are cancelled prematurely.
Tips: Enter the original premium amount in dollars and the Ontario short rate as a fraction (between 0 and 1). Both values must be valid (premium > 0, short rate between 0-1).
Q1: What is the Ontario short rate?
A: The Ontario short rate is a predetermined fraction used to calculate cancellation penalties for insurance policies in Ontario, Canada.
Q2: How is the short rate determined?
A: The short rate is typically set by insurance regulations in Ontario and may vary depending on the type of insurance and time remaining on the policy.
Q3: When is the short rate method used?
A: It's used when a policyholder cancels their insurance policy before the expiration date, and the insurer uses the short rate method to calculate the refund.
Q4: Are there alternatives to the short rate method?
A: Some policies may use pro-rata cancellation methods, but in Ontario, the short rate method is commonly used for early cancellations.
Q5: Can this calculator be used for other provinces?
A: This calculator is specific to Ontario's short rate method. Other provinces may have different calculation methods.