Dictionary of Insurance Terms: short rate, short term insurance
short rate, short term insurance
coverage for less than one year. Insurers generally charge higher rates for short-term policies than for longer term insurance, such as an annual policy, because of (1) the need to recoup relatively fixed administrative and processing costs over a shorter policy life; and (2) the likelihood of adverse selection, with buyers seeking insurance only at times of the year when they know they face greatest likelihood of loss.
