When a premium-bearing change is made to a policy mid-term, affected items must prorate the premium against the term.

Note: When a policy is canceled mid-term, items must be prorated based upon the cancellation effective date.

• Pro-rata premium can be determined against different transaction types with different term lengths and granularity.
• Pro-rata premium calculations are based on the selected term length with day granularity, meaning the premium is calculated to the day.
• Pro-rata premium is calculated and stored per item.
• Total pro-rata premium is calculated as the sum of all individual item pro-rata premiums.
• Total policy pro-rata premium and policy term premium are calculated and stored.

The following are displayed in Rate Preview:

• Individual item policy term premium

``((units * (calculated rate - prior rate))/granularity) + prior pro-Rata premium``

• Term: 1 year
• Effective date: 1/1/2017
• Granularity: day (365 units for 1/1/2017 – 1/1/2018)

### Policy Inception – 1/1/2017

Coverage A

• Full term amount: \$365
• Variables:
• Units = days(1/1/2018 – 1/1/2017) = 365
• Calculated rate = 365
• Prior rate = 0
• Prior pro-rata premium = 0
• Pro-rata premium = ((365 * (365 – 0)) / 365) + 0 = \$365

### Endorsement – 5/3/2017

Coverage A

• Full term amount: \$730
• Variables:
• Units = days(1/1/2018 – 5/3/2017) = 243
• Calculated rate = 730
• Prior rate = 365
• Prior pro-rata premium = 365
• Pro-rata premium = ((243 * (730 – 365)) / 365) + 365 = \$608

### Endorsement – 9/2/2017

Coverage A

• Full term amount: \$1095
• Variables:
• Units = days(1/1/2018 – 9/2/2017) = 121
• Calculated rate = 1095
• Prior rate = 730
• Prior pro-rata premium = 608
• Pro-rata premium = ((243 * (730 – 365)) / 365) + 365 = \$729