Pro rata

Pro rata is an adverb or adjective, meaning in proportion. The term is used in many legal and economic contexts. It is sometimes spelled pro-rata, but this is technically a misspelling of the Latin phrase. In North American English this term has been vernacularized to prorated.

Meanings

More specifically, pro rata means:

Pro rata has a Latin etymology, from pro, according to, for, or by, and rata, feminine ablative of calculated (rate or change).

Examples

Examples in law and economics include the following noted below.

Torts

When liability for a toxic tort or a defective product concerns many manufacturers, the liability under tort law is allocated pro rata.

Partnership liability

Each of several partners "is liable for his own share or proportion only, they are said to be bound pro rata. An example ... may be found in the liability of partners; each is liable ... only pro rata in relation to between themselves."

Cancellation (insurance)

An insurance policy may be canceled before the end of the policy period. This has the effect of ending the policy coverage on the date of the policy cancellation.

Cancellation methods

Three different calculation methods are commonly used. Cancellation methods are typically calculated using an online wheel calculator.

Pro rata

A non-penalty method of calculating the return premium of a canceled policy. A return premium factor is calculated by taking the number of days remaining in the policy period divided by the number of total days of the policy. This factor is multiplied by the written premium to arrive with the return premium.

Short Period Rate (old short rate)

A penalty method of calculating the return premium often used when the policy is canceled at the insured's request. It uses a table of factors that results in penalties that can be lower or higher than short rate (90% pro rata) depending upon the date of cancellation.

Short Period Rate (90% pro rata)

A penalty method that where the penalty is 10% of the unearned premium.