Opinion by
Henderson, J.,On the 19th of February, 1920, the defendant company issued a policy of fire insurance for $15,000 on a building in the City of Philadelphia; the term of the policy being five years from the date thereof, for which the plaintiff paid a premium of $828. On the 20th of July of the same year a fire occurred resulting in a loss to the insured which was adjusted with the company and the sum of $8,244.12 was paid to him on the 23d of September, 1920, by the delivery of a draft on a trust company for that amount. Endorsed on the back of the draft and signed by the insured was the following: “In consideration of the sum hereby paid, all claims and demands whatsoever against the Agricultural Insurance Company of Watertown, N. Y., by reason of the within mentioned claim for loss and damage are satisfied, compromised and discharged and the insurance is cancelled or reduced as set forth on the face of the draft.” The face of the draft, after stating the amount of the loss paid, contains the following: “And said policy is reduced in like amount.” It is this statement to which reference is made in the receipt and endorsement above quoted. On the 20th of September, 1920, the plaintiff surrendered his policy for cancellation and demanded the sum of $622.40 as unearned premium. This the defendant company refused to pay, but offered the plaintiff $372.64, the amount of unearned premium which it admitted to be due, based on the amount of insurance remaining on the property after the adjustment of the loss by the fire. The policy *305was surrendered for cancellation in accordance with the provision therein “this policy shall be cancelled at any time at the request of the insured; in which case the company shall, upon demand and surrender of this policy, refund the excess of paid premium above customary short rates for the expired term.” This the appellant contends is applicable whether a fire occurs or not and whether the loss is total or not. There is thus presented for our consideration the proper construction of the language above quoted as applied to the facts recited. It is clear that the holder of a standard policy may take advantage of the permission to surrender his policy and be entitled to a return of a proportionate part of the premium paid where the policy is still in force according to its terms when issued; but it does not follow that this is the case where there has been a destruction of the property and the indemnity agreed on has been paid. The policy issued to the plaintiff had not the same legal effect after the fire and the payment to the insured for his loss which it had when it was delivered. The thing insured had ceased to exist', at least it was so injured as to have entitled the holder to the payment of more than half the whole amount of the risk. The policy did not apply therefore to what had been burned. It was a contract of indemnity and would continue in force through the term for which it was written if the subject remained on which it could operate, but if that were destroyed, the right of the plaintiff was to have compensation to the extent contracted for if the loss equalled that amount. When the indemnity was paid, the contract was executed to the extent which the loss paid bore to the whole amount of the risk, and if the loss had been total, payment by the insurance company of the amount of the policy would have been a performance of its undertaking. The premium paid was the consideration on which the company assumed the risk for the term. The rate was lower for the long period than for a short one. The insured had the benefit of the lower rate and *306the insurance company assumed the risk of a loss many times in excess of the compensation received. What remained to the insured if he had retained his policy was the right to receive the balance of the amount due on the policy if a loss subsequently occurred. It is not contended by the appellant that after the payment to him the insurance liability was greater than the diminished amount of the whole risk. That' was the policy which was in force therefore after the fire. It was the only thing he had to surrender and it was the contract of insurance on which the surrender clause in the policy operated when the surrender was tendered. The surrender clause, we think, has no broader operation than this. It was inserted in contemplation of the continuance of conditions as they existed at the time the policy was issued, but these conditions changed; the condition of the property changed, the liability of the company changed, and the contract as it existed after the receipt by the insured of the payment made t’o him was different in its legal effect from what it was when it was issued. No reason has been suggested why the parties to a contract of insurance may not agree on a reduction in the amount of the risk, and that1 was the effect of the acceptance by the insured of the draft containing a stipulation that the policy was reduced to an amount equal to the difference between the loss paid and the original amount' stated in the policy. Whether we regard the amount of the policy as automatically reduced by the fire or by agreement of the parties, the result is the same. The contention of the appellant would require all insurance companies using the standard policy to return to the insured after a loss all the premium paid except the short rate charged for the period from the date of the policy to the time of the loss, and this would apply as well to a total as a partial loss. This view could only be supported by a construction of the surrender clause which makes it applicable to all policies irrespective of contingencies subsequently arising which *307modify the legal effect of the contract, which contingencies the parties necessarily had in contemplation when the policy was issued. Such a conclusion is not demanded by the terms of the policy, and would work an inequitable result.
If we are correct thus far, the court would not be in error in holding that the defendant might show that at the time the policy was issued, the plaintiff knew it was the practice of insurance companies to settle for policies returned for cancellation after a partial loss on the basis of a reduced risk.
The judgment is affirmed.