Once you purchase a car insurance policy, you must familiarise yourself with different terms that govern the policy’s functionality. It shall help you steer clear of any problem that may catch you unawares at a time when you want to be least bothered by insurance-related issues.
In this context, the terms - non-renewal and cancellation - often confuse the policy buyers. Many think both are the same and make wrong decisions in ignorance. As a result, their insurance experience does not remain good. Hope you don't make wrong insurance decisions and regret them later. This post will offer an in-depth insight into car insurance policy cancellation and non-renewal from a conceptual standpoint. It will then help you make the right decision. So, without much ado, let's start learning both concepts.
Cancellation of Car Insurance
If your car insurance gets terminated before the expiry of the period for which the policy is bought, it is termed ‘cancellation’. You or the insurance company can cancel the policy by citing specific reasons. As a result, the car insurance coverage from the particular policy stops. If you cancel the policy as a result of selling your car to someone, it's fine. But if you still have a car, you will soon require a four-wheeler insurance policy with a mandatory third-party cover to prevent legal obstacles while riding.
Non-renewal of Car Insurance
Once the insurance policy's duration ends, you may choose not to renew the plan further. Alternatively, the insurance company may decline to renew the policy by stating conditions that have made your car ‘un-insurable’. This refers to the ‘non-renewal’ of car insurance. The insurance company must provide proper justification for non-renewal and serve the insured a prior notice stating this intent.
Key Differences Between Car Insurance Cancellation and Non-renewal
You can find the differences between cancellation and non-renewal of a four-wheeler insurance policy in the table below.
|Effective Time||Cancellation usually occurs when the policy is in effect, i.e., when the coverage is ongoing.||It happens only when the policy’s coverage has lapsed. The policy lapses if you don't pay your renewal premium, even within 90 days of the policy expiration date.|
You may have to pay a higher amount as a renewal premium since the new insurance provider may impose a monetary penalty for cancellation on your part.
If the insurer has cancelled the policy, they may charge a higher premium because you may be liable for reasons that compelled cancellation.
The premium value is not directly impacted. However, if a renewal doesn’t occur within three months of the policy expiration date, the accumulated NCB (No-Claim Bonus) may become zero. The premium rate of the new insurer may be high.
If the insurer is charging a high premium rate, it is because your car is deemed ‘un-insurable’, and the IDV may have become negative.
You can buy a new car insurance policy from a different company.
The existing insurer may deny selling you a new policy.
|You can continue with your existing insurer or opt for a new insurer on policy renewal.|
(From the Insurer’s Perspective)
Reasons for cancellation by the insurance company:
The RTO has suspended your car's registration for involvement in activities like drunk driving.
Your insurer labels you as a high-risk customer with unsafe driving habits since your car has been involved in various accidents within a short span.
You have raised a claim that has been found to be fraudulent by the insurer’s surveyor. This implies that you had staged the accident and shared misleading information about the incident.
You have concealed critical information about the insured bike at the time of buying insurance. For example, you had opted for a personal car insurance cover while the car is deployed for commercial purposes.
The insurer claims that your medical/ health condition is such that your driving capability will be impaired. Such medical problems include eyesight problems, dementia, epilepsy etc.
Reasons for non-renewal by the insurance company
You had been found involved in unsafe and illegal driving practices, but the insurer had earlier chosen not to cancel your car insurance coverage.
You are a high-risk client who has been given over-speeding challans frequently.
You had raised multiple claim requests during the policy period and have been involved in numerous accidents.
(From the Insured Person’s Perspective)
Reasons you may cancel the car insurance policy:
You are planning to shift to a new location where the present four-wheeler insurance provider doesn’t offer adequate coverage.
You are no longer driving the insured car.
You have sold the car to another person who is seeking fresh coverage from another insurer.
You want to migrate to a new insurance provider offering additional facilities at competitive premium rates.
You had not opted for comprehensive insurance cover, and your car has been stolen.
Reasons for not renewing the car insurance policy
Your present insurer doesn’t provide adequate support in the new locality you plan to shift to.
Your insurer has chosen to discontinue a particular plan or add-on benefit from the next insurance coverage period, and you want to subscribe to such an add-on from another insurer.
Driving on Indian roads without a valid car insurance policy is illegal per the Motor Vehicles Act, 1988. After cancelling a policy, you can renew your four-wheeler insurance online by weighing the pros and cons of different policy offerings.
Read more - A Complete Guide on Car Insurance