Proration

Proration is a process of allocating costs or expenses over a period of time. It is often used in the context of real estate, insurance, and telecommunications.

In real estate, proration is used to allocate the costs of owning a property between the buyer and seller. For example, the seller may be responsible for paying the property taxes for the entire year, but the buyer may be responsible for paying the insurance for the entire year. The proration would divide the costs of the property taxes and insurance between the buyer and seller based on the date of the sale.

In insurance, proration is used to allocate the cost of an insurance policy between the old and new policyholders. For example, if a policyholder cancels their policy on January 1st, the insurance company will prorate the cost of the policy for the month of January. The insurance company will refund the policyholder for the portion of the policy that they did not use.

In telecommunications, proration is used to allocate the cost of a telecommunications service between the old and new subscribers. For example, if a subscriber cancels their telecommunications service on January 1st, the telecommunications company will prorate the cost of the service for the month of January. The telecommunications company will refund the subscriber for the portion of the service that they did not use.

Proration is a common practice in many industries. It is a way to fairly allocate costs and expenses between parties.