Cancellation is usually described as a right to end a contract and receive money back for the part you did not use. The amount is set by a formula, and the formula is written in the contract or in the rules that govern it. Two papers can use the same words and produce different refunds, so the method matters as much as the promise to refund.
The common calculation methods
Service contract cancellation clauses commonly use one of a few methods. A pro-rata method returns the unused share of the price in proportion to the unused time or unused coverage. A short-rate method keeps a larger share of the price than the used time alone would justify, which lowers the refund. Some contracts deduct a fixed charge for processing, and some deduct claims already paid. Find which method the paper names, and whether a deduction comes off before the refund is figured.
What moves the refund
Four things usually change the result: the date the cancellation is treated as effective, the date the request is treated as received, any charge kept by the seller, and any claim paid from the contract. A later effective date gives you less refund. A paid claim can reduce the balance even when you have used little of the term. Check each of these before you send the request.
Questions to ask before you cancel
Ask which formula the contract uses, and ask the seller to show the calculation for your own paper with the dates filled in. Ask which date the seller will treat as the effective date of cancellation. Ask whether a claim already paid reduces the refund, and whether any charge is kept on cancellation. Ask how and where the refund will be sent, and how long the seller says it will take. Keep the request, the reply, and any confirmation of receipt.
What this guide does not do
This guide explains how cancellation refunds are usually calculated. It does not say what any particular contract refunds, and it does not promise that any refund will be paid. Some states set rules for cancellation and refund in service contracts. The state pages on this site list the statute or program named for each state and the roster where one is published, and they say where this edition has not read a state's rules.