<P> The date an insurance policy's coverage is started . Also called effective date . </P> <P> The period of time that an insurance policy provides coverage . Most policies have a one - year term (365 days) but many other policies also have a 6 - month term . Policy terms can be for any length of time and can be for a short period when the period of risk is also short . Policy terms can also be for a multi-year period . </P> <P> When a policy is canceled before its expiration date a return premium may be owed to the insured . The return premium is generally calculated using a wheel calculator . The return premium is calculated by calculating the unearned premium and then subtracting any unpaid premium and penalty for early cancellation . Short rate (old short rate) and short rate (90% pro rata) are penalty methods of calculating the return premium . </P> <P> Earned premium is the portion of an insurance written premium which is considered "earned" by the insurer, based on the part of the policy period that the insurance has been in effect, and during which the insurer has been exposed to loss . For instance, if a 365 - day policy with a full premium payment at the beginning of the term has been in effect for 120 days, 120 / 365 of the premium is considered earned . Earned premium will not be returned to the insured if the policy is cancelled . </P>

What is a return premium on car insurance
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