Prorating is the process of dividing something into equal parts based on a particular calculation. This can be applied to various areas such as finance, real estate, and insurance. In finance, prorating usually refers to the allocation of expenses or revenues across a period of time. For example, if a customer buys a 12-month subscription but cancels after 6 months, the refund will be prorated, and the amount refunded will only cover the remaining 6 months. In real estate, prorated expenses may be shared between the buyer and the seller based on the time each party owns the property. Similarly, in insurance, if a policyholder cancels their policy before the end of the term, they may receive a prorated refund of their premiums. Overall, prorating is a useful tool for calculating the correct amount of payments or refunds when a transaction involves partial use of a service or asset.
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