The formula to calculate the Prorated Premium (Pp) is:
\[ P_p = \left(\frac{P_t}{T_t}\right) \times T_p \]
Where:
A prorated premium is the amount of premium that is calculated based on the actual period of coverage within the total policy period. This is often used when a policy is canceled before its expiration date or when coverage starts mid-term. The prorated premium ensures that the policyholder only pays for the coverage period they actually use.
Let's assume the following values:
Using the formula to calculate the Prorated Premium:
\[ P_p = \left(\frac{1200}{365}\right) \times 120 \approx 394.52 \]
The Prorated Premium is approximately $394.52.
