A car insurance policy ensures the benefits mentioned in your policy details for the year you have paid for. Every year, or depending on the duration of your policy term, your car insurance policy needs to be renewed. The car insurance policy renewal needs to happen on or before the due date that your car insurance provider mentions. However, if the same does not happen on time, you will have another 90 days to clear your car insurance renewal payment. If you couldn't do so even during these 90 days, the policy could bear either a non-renewal or cancellation status. While these two terminologies may seem the same to most customers, the reality is not the same.
Although they sound similar, they have different meanings. While non-renewal is the inability of the policyholder to make the car insurance premium payment on time, cancellation means the policy is terminated. To help you understand this stark difference, here is a quick look at what is car insurance non-renewal and car insurance policy cancellation and the five key differences between these two:
Understanding Car Insurance Non-Renewal
Non-renewal of car insurance happens after the policy duration has ended, and the insurer or the policyholder does not renew the car insurance policy. The policyholder can easily make the payment post the car insurance renewal date, which is 90 days post the end of the policy term. However, if the policyholder fails to make the payment within this deadline, the policy will lapse, and the concerned individual will need to buy a new policy.
Understanding Car Insurance Cancellation
As the term suggests, car insurance cancellation is the policy termination that can be initiated either by the insurer or the policyholder. The policyholder can cancel their insurance for several reasons, usually accepted. If the insurer cancels the policy, it could be due to the poor condition of the car, frequent claims induced due to poor driving, etc. Check with the insurer for the exact reason for policy cancellation.
5 Key Differences Between Non-Renewal & Cancellation in Car Insurance
Now that we know what a car insurance non-renewal is and cancellation is, let us understand the critical differences between both:
1. Car Insurance Non-renewal Happens When Your Policy Period Has Elapsed; Cancellation Happens During the Policy Period
The first significant difference between cancellation and non-renewal is the policy period. Non-renewal takes place only when the car insurance policy term is completed. On the other hand, the cancellation must be initiated during the policy term, which the policyholder or the insurance company does.
2. Policyholders Can Cancel Their Policies Due to These Reasons; Insufficient Bank Balance Could Attribute to Non-renewal
The policyholder can cancel their car insurance policy anytime before its renewal date. These can be for reasons such as:
- Choosing Another Insurance Provider
The policyholder can opt for a new car insurance policy to get additional benefits, lower premiums, or better coverage. Or they can even upgrade their policy with the existing insurance company and avail the benefits.
- Unplanned Relocation
The policyholder moves to a location not covered under the existing car insurance policy.
- Vehicle Sale
You can cancel your car insurance policy if you sell the vehicle to someone else.
- The Vehicle Lost or Stolen
A third-party car insurance policy does not cover the stolen vehicle. So, you can either wait for the renewal to upgrade it to a comprehensive car insurance policy or cancel it immediately.
One may either forget to renew their car insurance policies or could not do it due to insufficient bank balance on renewal. The last one can be triggered due to a loss of employment for an extended period.
3. Non-renewal does not Come with a Penalty on Premium Initially, but That Is not the Same with Cancellation
Non-renewal of the car insurance doesn't affect the premium your insurance provider will charge you. Policyholders are given 90 days from the policy expiration date to renew their policy and avoid any hike in the premiums. However, insurance companies do not see car insurance cancellation in a good light. It can incur a higher premium by your new insurer as a penalty for cancellation or transferring the insurance policy.
The penalty may or may not be applied depending on the reason for cancellation. Still, it will be incredibly high if the insurance provider initiates the cancellation due to legal concerns or risky driving.
4. No Claim Bonus (NCB) Can Be Transferred If the Policy Is Cancelled, not If the Non-renewal Period Has Elapsed
Accumulated NCB is a benefit every policyholder gets if they have not registered any claim during the policy tenure. Since cancellation happens before the policy tenure is over, the policyholder can always transfer this NCB amount to the new car insurance policy. However, if the policy is not renewed within 90 days of the policy expiration date, the accumulated NCB is lost.
5. Cancellation of Car Insurance Can Lead to the Existing Insurance Company Refusing to Provide Insurance Again
Since the cancellation is either initiated by the insurance holder or the insurer in case of adverse conditions, the same insurance company may refuse to provide a new car insurance policy to the policyholder. For non-renewal, this is not the case, and you can opt for a new or existing insurance policy from the same provider.
You’ll now understand how car insurance non-renewal and car insurance cancellation work. While either cannot stop you from acquiring a new policy, these do come with certain terms and conditions. Make a detailed comparison when buying the right car insurance policy.
You can compare car insurance online and browse multiple car insurance companies and policies to make an informed decision.
Read more - Know About Car Insurance Policy Cancellation