Calculations

Answer: $10,000 x 82% = $8,200 according to the short-term cancellation table rate
Option a): 325 days / 365 days x $10,000 = $8,904.11 proportional to the number of days remaining for the term
Option c): $10,000 x 18% = $1,800 based on an inversed application of the short-term cancellation table rate
Option d): 40 days / 365 days x $10,000 = $1,095.89 proportional to the number of days during which the policy was in effect

When the insured requests that the policy be cancelled, the insurer provides a credit based on the short-term cancellation table and keeps a portion of the premium that the insured has already paid. The above calculations illustrate the appropriate method as well as the errors that could lead to the numbers provided in the other answer options.

It is only when the insurer initiates the cancellation itself that it offers a cancellation credit proportional to the number of days for which the policy has been in force. In those cases, the insured is not penalized and receives the full amount of the premium that has not been earned by the insurer.

Reference in manual F413, 1^re édition, 2013:

Tome 3, pages 401 à 403, section 16.3.2 – La résiliation par l’assuré

Classification in the evaluation table for skill 03-413:

Subsection 3.2 – Process contract amendment, renewal and termination applications as well as contract cancellations

Recommend commercial-lines property and civil liability insurance products adapted to the client's needs Competency 03-413

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