# How to Prorate Insurance When You Buy a Property Mid-Year

Source: https://www.creshield.com/resources/prorate-insurance-new-property-mid-year
By Brad Cottam, CRE Shield (licensed in Kansas and Texas). Updated 2026-10-29.

When you add a building to a master policy partway through the year, the premium for that building is usually prorated by days: the building's annual premium, times the days left in the policy term, divided by the days in the full term. Your tenant's reimbursement for that first stretch should follow the same math, starting on the day you took ownership. The details depend on the carrier's rules and on the lease, so confirm both before you send a bill.

## Why mid-year purchases cause billing problems

A master (or blanket) policy has one renewal date for every building on it. Your closings do not. A building bought in September joins a policy that started in January, so the first insurance period for that building is short, and it ends on the policy's renewal date, not the lease's.

That leaves you with two questions to answer on paper: what did the carrier charge for the stub period, and what part of that can you recover from the tenant? See [policy year vs lease year](/resources/policy-year-vs-lease-year-insurance-billing) for why those two calendars rarely match.

## The basic proration formula

For a building added during the term:

**Annual premium for the building x (days from the effective date to the policy expiration) / (days in the full policy term)**

Many carriers charge an added location this way, often called a pro rata additional premium. Some apply minimum premiums, fees or taxes on top, so ask your agent whether the carrier's endorsement quote is pure daily proration or includes other charges.

## A worked example (illustrative numbers)

These numbers are made up to show the steps. They are not a quote or a rate.

- The policy runs January 1 to the next January 1: 365 days.
- The newly added building's annual premium, as rated by the carrier, is $9,000.
- The building joins the policy on September 1.
- Days from September 1 to January 1: 30 (September) + 31 (October) + 30 (November) + 31 (December) = 122 days.

| Step | Calculation | Result |
|---|---|---|
| Daily rate (rounded, for reference) | $9,000 / 365 | about $24.66 per day |
| Premium for the stub period | $9,000 x 122 / 365 (multiply first, then divide, so rounding does not creep in) | **$3,008.22** |

At the next renewal, the building is rated for a full year on the policy, and the amount can change. Do not assume next year's premium equals this year's annual figure.

## Billing the tenant for the stub period

If the lease is net and passes insurance through to the tenant, there are usually three things to check:

1. **When does the tenant's obligation start for you?** Normally from the day you became the owner, not from the start of the policy year. Check the lease and any estoppel or assignment you received at closing. See [reading the lease insurance clause](/resources/reading-lease-insurance-clause).
2. **Which premium can you pass through?** Typically the premium allocated to that building, using the same method you use for the rest of the portfolio. See [how to allocate a premium across properties](/resources/allocate-insurance-premium-across-properties).
3. **Is the charge billed up front, or reconciled later?** Many leases bill an estimate and true up after the year closes. See [how to bill a tenant for property insurance](/resources/how-to-bill-tenant-for-property-insurance).

In the example, the stub period amount of $3,008.22 would be the building's share for September 1 through December 31, if the lease allows full recovery. Some leases cap annual increases or limit what counts as reimbursable, so read those clauses first. See [caps and limits on insurance pass-throughs](/resources/insurance-increase-caps-net-lease).

## What about the seller's policy?

The seller's policy normally stops covering you when ownership changes, and any return premium on it generally goes to the seller. Do not count on being covered under it. Have your own coverage effective at closing, and tell the tenant who the new owner and insurer are. See [the insurance timeline around a closing](/resources/insurance-timeline-cre-closing).

If the tenant paid the seller an insurance reimbursement for a period that runs past your closing date, that money may need to be credited between buyer and seller. This is usually handled in closing documents, so raise it with your closing team early.

## Keep a record

For each mid-year addition, keep one page that shows:

- The effective date and the days remaining in the term.
- The carrier's quoted additional premium for the building.
- Your proration math and the amount you are billing.
- The lease section that allows the pass-through.

If a tenant questions the charge, this page answers most of it. See [when a tenant disputes the insurance charge](/resources/tenant-disputes-insurance-charge).

## FAQ

### Is mid-year insurance always prorated by days?
Often, but not always. Carriers can apply minimum premiums, fees or taxes, and some policies are written differently. Ask your agent how the carrier calculated the additional premium for your building.

### Can I bill the tenant for the days before I owned the building?
Usually not. Your obligation, and the tenant's reimbursement to you, normally start when you take ownership. Any earlier period typically belongs to the prior owner and the prior owner's policy.

### What if the building was added by a short-term extension that is not a full year?
The same method applies: use the carrier's premium for the building and the actual number of days of coverage. Keep the carrier's endorsement as backup.

### Do I need to true up at year end?
If the lease bills an estimate, yes. Compare the amount you billed to the carrier's actual charge and settle the difference, following whatever the lease says about timing.

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*This article is general education, not insurance or legal advice. The numbers above are illustrative only. Lease terms, carrier rules and rating vary. CRE Shield is licensed in Kansas and Texas and transacts insurance only in states where it is licensed.*