Calculations based on the short-term cancellation table on p.119 of the Manual:

Correct answer:
Percentage of premium refunded:
365 days - 178 days = 187 days until expiry, which corresponds to 46% of the premium to be repaid according to the short-term cancellation table

Premium earned by the insurer:
$600 x (100% - 46%) = $600 x 54% = $324

Refund = premium paid – premium earned by the insurer:
$450 - $324 = $126

Distractor a): $600 x 54% = $324, calculating the premium earned by the insurer
Distractor b): $600 x 46% = $276, using the percentage to be refunded without taking into account that the insured only paid part of the total premium charged
Distractor c): $450 x 46% = $207, applying the refund percentage to the partial premium only

When the cancellation is at the insured’s request, the insurer must use a cancellation table which indicates what percentage of the premium earned from the insured it may keep.

Also, the insurer is entitled to keep this percentage of the premium paid to cover its costs. This is why the amount to be repaid is lower.

In this case, it must also be taken into account that Hamed only paid part of the premium, which reduces the refund to which he is entitled.

Answers a), b) and c) are false since they do not take into account the appropriate amounts or rates.

Reference in Manual F411, 1^st Edition 2011:

Book 2, pages 110 to 112, section 8.3.2 - Cancellation by the insured

Classification in the evaluation table for skill 03-411:

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

Recommend personal property insurance products adapted to the clients' needs Competency 03-411

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