Things to Know Before Cancelling Your Car Insurance Policy
Thinking of cancelling your car insurance? Learn the key reasons, consequences, and process to ensure a smooth transition to a new policy without penalties.
There are times that you are required to cancel a car insurance policy for various reasons. Some of them are listed below:
Long Term Car Insurance Cancellation:
The long-term policy cancellation which has a tenure of 3+1-year tenure will have standard conditions. These policies come with a free-look-up period of 30 days from the policy inception date. In case a policyholder has cancelled the policy within the free look-up period, they are entitled to a refund on a pro-rata basis.
You can cancel the long-term own damage policy during its tenure by giving notice of policy cancellation. In these cases, the premium amount refunded will be:
- A full refund of the premium in future years.
- For the year in which the insurance policy is cancelled
- If claims are reported: No refund will be provided
- If no claims are reported: Refund of pro-rata premium will be provided
- Goods and Services Tax (GST) and other taxes will be refunded to the extent permissible by the authorities.
Consequences of Not Purchasing a New Car Insurance Policy Upon Cancellation:
It is mandatory to have a car insurance policy with you because it acts as proof that you are covered for any damage or accident which may take place on the road. Apart from this, it also provides third-party insurance to avail coverage from damage caused to any third person from your vehicle. However, if you don’t have a new car insurance policy during the cancellation time, you might have to deal with the following circumstances:
- You can be penalized or fined for driving your card without a driving license.
- You have to bear all the accidental damage and personal expenses. In addition, you will not be offered third party car insurance coverage to save you from financial as well as legal expenses.
- In case you delay, you have to make the higher premium payment.
Thus, if you wish to purchase a new car insurance plan without any sort of consequences, then you need to take the required steps to cancel the policy on time and purchase a new policy immediately.
Reasons for Cancelling a Car Insurance:
- Selling your car - If you are planning to sell your car and do not plan to buy a new car in the near future, you can terminate the older policy and get a refund.
- If your car is stolen - If in case your car gets stolen and you do not have a comprehensive cover, you must cancel your policy. If you have a comprehensive cover, you can place a claim request and the insurance company will pay the IDV (Insured Declared Value).
- If your car is very old - If you do not wish to drive your car any longer, or have plans to dump it, it is advisable to cancel the car insurance policy.
- Dissatisfied with your current insurance company - Sometimes you may realise later that the benefits provided by your current insurer are not good enough, or if the claims take too long to be approved, you may cancel your car insurance with that company.
Process of Cancelling a Car Insurance:
Given below are the basic steps involved in cancelling a car insurance policy:
- If in case you have decided to cancel your car insurance, you must first inform the current insurance company. The insurance company then starts the cancellation process, which takes up to 7 to 15 days.
- The insurance company then guides you through the cancellation process. Some insurers require you to sign a document for cancelling the policy. Some companies may require you to send an email to them. Some may also ask you to provide a signed declaration giving a go ahead for the cancellation. After the cancellation is approved, the company will confirm the process. The due refund is also mentioned in the letter.
- You should not forget to request the company to return your certificate of car insurance policy. This certificate is useful when applying for a new insurance policy and to safeguard the NCB (No Claim Bonus).
- Do not forget to check for refund if the policy has some time left. If you have paid the annual premium, it is definite that you will be liable to receive a refund from the insurance company.
- Remember to apply for a new policy, while you apply for cancellation of the old one. If you do not do so, you may have to face penalties, liabilities in case of an accident causing personal injuries or damage to property, or you might have to pay a higher premium in case of a new policy.
Although it is fairly easy to cancel an old car insurance policy, it is advisable that you have a solid reason to do so. You must also be prepared with plans and quotes of the that you want to apply for. Despite all the issues you are facing with the current insurance company, never driver without a comprehensive car insurance.
GST Update: GST of 18% is applicable on car insurance effective from the 1st of July, 2017
FAQs on Car Insurance Cancellation
- What happens if I just cancel my car insurance?
In general, insurance companies will refund the money for the unused part of your car insurance policy. But based on your state and when you cancel, the insurance company will charge a cancellation fee.
- Are there charges for cancelling car insurance policy?
It depends on when you are cancelling your car insurance policy.
- Can I cancel my existing car insurance policy?
Yes, you cancel your existing car insurance policy.
- What is the free look-up period in a car insurance policy?
In a car insurance policy, the free look-up period often refers to a grace time granted by the insurance provider during which the policyholder can check the policy terms and conditions and, if dissatisfied, cancel the contract without incurring any additional fees or charges. It's similar to a trial period for an insurance policy.
- Can we change car insurance company?
Yes, you can change your car insurance company.
- Can we NCB on new car insurance?
Yes, you get the NCB transferred to a new car as this discount will be given to you.
- What documents are required for insurance transfer?
Documents needed for insurance transfer are a new copy of registration certificate, Form 30, Form 29, NOC from the previous policyholder, policy document of old car, new application form, no claim bonus difference amount, and inspection report.
- Can we cancel car insurance online?
Yes, a car insurance policy can be cancelled online.
- Can I cancel my car insurance policy within 14 days?
Yes, you can cancel your car insurance policy anytime.
- What is IDV?
IDV stands for Insured Declared Value.
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