There are plenty of articles, sites and blogs informing a potential customer about how to go about opting in for a car insurance policy, the considerations that must be kept in mind, the benefits and drawbacks of the various policies. But what if you have insurance cover for your car and no longer have use for it? ‘Is there an option to cancel the policy?’ You ask and the answer is a definitive yes! Read on to learn more about it.
Why Would Someone Cancel their Policy?
People can choose to terminate their insurance policies in the following circumstances–
- If he/ she is planning on selling the car.
- If the car has been stolen and the insured does not have a comprehensive insurance cover that covers theft of the car.
- If the insured plans to move to a different part of India.
- If the car is quite old and the insured does not intend on driving it anymore.
- If the insured is unhappy with the current insurance policy or the company.
Please note: There is no option of cancellation in case of a long-term third-party motor insurance policy before the expiry of a period of 3 years. Only in circumstances that the car is sold, in disuse, lost, or is stolen, can the policy be cancelled.
Free-look Period in Car Insurance
A free-look period is quantified as a 10-day period (depending on the insurer), allowing the insured to contemplate whether to keep the car insurance policy. It is during this period that the insured will receive a full refund of the money paid if he or she is not satisfied with the policy cover and wishes to cancel.
Before Cancelling your Car Policy, Get Another One First
It is absolutely essential that the insured opts for a new policy cover prior to cancelling the existing policy since –
- Driving uninsured will be considered illegal on Indian roads and will attract heavy penalties.
- It provides financial security to the insured.
- The motor car owner might have to pay a much higher premium when they opt for motor insurance in the future as premiums of third-party insurance may vary/increase year on year.
- The car owner might be flagged as a high-risk driver in case the insurance lapses on the record with no replacement subsequently.
Steps to Follow for Policy Cancellation
- Step 1: The first step is to inform the insurance company about the cancellation. The process usually involves the policyholders sending a letter or email to the insurance company to that effect and/ or signing a document cancelling the insurance cover.
- Step 2: It is essential that the insured sends a declaration with his or her signature providing the insurer permission to cancel the policy. The process of cancellation is in effect only after this formality is fulfilled.
- Step 3: The company will revert back confirming the said declaration and provide details about the refund amount.
- Step 4: The entire process will usually take 7 to 15 days.
- Step 5: Always remember to collect the certificate of the car insurance policy for it is important for transferring the No Claim Bonus (NCB) while purchasing a new insurance policy.
Please note: There might be slight variations for each insurer, so it is best to follow their guidelines to avoid any slip-ups or hassles. If one does not explicitly request for cancellation and allows the policy to cancel out on its own by not paying the premium, then it accounts for cancellation by non-payment. The insurer tends to offer a grace period and the insured will be charged for payment of that grace period. Therefore, it is best not to resort to this method for cancellation of the policy.
List of Documents Required to Cancel Your Policy
- Car insurance policy papers.
- Driving license.
- RC (Registration card).
- Letter requesting cancellation or document cancelling the insurance.
- Declaration form for cancellation.
- Any other identity proof (if need be).
Note: Please contact the insurer to know if there are any other additional documents required.
How to Get a Refund on Policy Cancellation (if Applicable?)
Before the policy lapses, it is in the insured’s best interests to check up on the refund policy of the insurer. In case, the policyholder has already made the payment of the premium promptly, then the car insurance company is liable to make the refund payment to the insured. If the termination of the policy is sudden, then the chances of getting back the refund are highly unlikely.
The refund is usually offered on a pro data basis. For instance, if the cancellation is done in the first few months of purchasing the policy, then the refund might be nearly 80% of the premium amount. The turnaround time for the policy refund will not be more than 14 working days.
The policyholder must exercise due diligence and ensure that the refund money is transferred to the bank account of the policyholder only.
Do not Cancel Your Policy If Your Policy is About to Expire
It is not advisable to cancel the policy if it is about to expire anyway, as the insured has complete discretion to change the policy type or the insurer at the time of renewal.
Purchasing your car insurance involved a considerable amount of homework. Cancellation of this very same policy should be an equally, if not more, well-thought decision. Understanding the consequences of cancellation, the alternatives available and further course of action is essential before undertaking this huge step.