Q:
What Is the Formula for Pro Rata?
A:
Quick Answer
The formula for computing pro rata coverage is a tool insurance companies use to determine equitable coverage rates. It can also be used to work out equitable payments when more than one insurer provides coverage.
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To determine shared liability, divide the first carrier's coverage amount by the total coverage amount from all sources. The resulting percentage must then be multiplied by the actual loss claimed. The product of this is the pro rata liability of the carrier. To recompute premium costs, after a mid-year addition to an auto policy, for example, divide the remaining days of the term by the overall length of the policy term. The result is a decimal expressing the necessary adjustment amount.
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