This is when either the policyholder or the insurance company terminates a policy. Your rights to cancel as a policyholder vary from state to state and are limited by state laws. However, here are some of the ways in which a policy can be cancelled: Flat: Cancellation of an insurance policy on the date the policy was to begin. In these cases, there is no premium charge or penalty. Pro-Rata: Termination of an insurance policy before it would normally end. This early termination could be due to non/payment of premium, or for some other reason at the insured’s request or the company’s request. The premium charged is then adjusted in proportion to the exact time the policy was in force. Short Rate: When an insured cancels a policy midterm or before the expiration date of the policy, the premium refunded to the insured will be surcharged or a penalty will be applied.