What occurs when a policy is canceled before its expiration date?

When a policy is canceled before its expiration date, this is referred to as cancellation. Cancellation means that the insurance policy is being terminated prior to the scheduled expiration date, often at the request of either the insurer or the insured. This can lead to various consequences, including possible refunds or adjustments of premiums based on the terms of the policy and the timing of the cancellation.

In the context of the insurance process, it is essential to differentiate this from nonrenewal, which occurs when a policy is not renewed at the end of its term. The other terms relate to how refunds are calculated in different scenarios. For instance, pro rata refers to the method of refunding premiums based on the actual time the policy was in effect, while short rate involves a different calculation that may penalize the insured for canceling early. However, these terms do not define the action of terminating the policy itself, which is the central focus of the question.