A workers comp insurance policy may be cancelled before the end of the policy period, but not without penalty. Most policies require a short rate penalty when a policy holder requests cancellation.

The amount of the penalty is determined by a table of factors and will be steep in the early days of the policy, gradually tapering off the closer the policy gets to the expiration date.

For example, if you have a one-year policy and you cancel after six months, the short rate penalty allows the company to maintain more than one-half of the annual premium. Policies are required to clearly describe any cancellation penalties.