Proration
Updated: 21 October 2024
What Does Proration Mean?
Insuranceopedia Explains Proration
Proration is often used when a payment is adjusted proportionally due to an external factor that prevents full payment. A common example is when someone rents an apartment on the 15th of the month; by the 30th, they are only expected to pay half of the month’s rent based on the length of their tenancy.
Another instance of proration occurs when a corporation decides to pay shareholders with a combination of shares and cash because it cannot fully compensate them with either option alone.
