Registered Insurance Brokers of Ontario (RIBO) Exam 2026 – 400 Free Practice Questions to Pass the Exam

The correct answer pertains to short rate cancellation, which is a specific method of terminating an insurance policy. When an insured decides to cancel their auto policy, they can typically do so through short rate cancellation, which means that they are entitled to receive a return premium, but it will be less than the proportionate amount of the premium that corresponds to the time the policy was in effect.

In this form of cancellation, the insurance company calculates the return premium by applying a short rate schedule that accounts for the administrative costs and losses the insurer incurs by canceling the policy early. This method reflects the idea that an insurer has additional costs when a policy is canceled before the end of its term.

This contrasts with the concept of pro-rata cancellation, where the insured would receive a full refund for the unused premium based strictly on the time the policy was in force. Such a straightforward return is not applicable in cases of short rate cancellation.

The other options like full cancellation, partial cancellation, or pro-rata without conditions do not apply accurately in the context of the question regarding termination of an auto policy. Full cancellation lacks nuance regarding potential refunds, and partial cancellation does not fit because it implies maintaining some parts of coverage, whereas the question specifically addresses the termination of the entire policy.