What is prorate?

Prorate refers to the process of dividing and allocating charges, costs, or benefits among multiple parties or time periods in a fair and proportional manner. It is commonly used in finance, accounting, and insurance industries to distribute expenses or revenue based on a specific formula or equation. In insurance, proration is used to determine the amount of policy benefits to be paid to a beneficiary based on the length of time covered by the policy's premium. In accounting, proration is used to distribute expenses such as rent, utilities, and salaries among different departments or accounts. Proration is also used in the distribution of income, such as the allocation of profits among partners in a business. Overall, prorating ensures that costs or benefits are shared equitably among relevant parties and time periods.