Important Points Before Cancelling Car Insurance

There may be situations where you might want to cancel your car insurance policy. In such cases, there might be a certain amount of money that you might have to pay to your insurance company as fees. Whether or not the fee is charged will depend upon the time when you cancel your plan.

For instance, if you cancel your policy during the term of the insurance, a fee will be charged. If the annual premium has been paid and there is still time left on the policy, then the insurer will be responsible for reimbursement of your premium amount on cancellation.

Reasons for Cancelling a Car Insurance

There may be various reasons why you would want to cancel your insurance policy.

1. Selling the Car: If you want to sell your car, the old insurance will serve no purpose, and you will have to get it cancelled.
2. Switching Insurance Provider: You may be planning to change your car insurance provider for better coverage or a lower premium rate.
3. Moving to a Different Place: Vehicle owners relocating to a different state or city may need to switch their insurance provider.

There could be other reasons too, such as theft of your vehicle, disposal of your car due to the age of the vehicle, and dissatisfaction with your insurance company due to various reasons such as a high premium, stringent policy clauses, lower sum assured, or some similar reason.

Process of Cancelling a Car Insurance

Having an auto insurance policy is imperative for everyone who owns a car. If you choose to apply for cancellation of the existing policy for any reason, you must buy another one after that to stay legally compliant. 

These are the steps to follow for the cancellation of a car insurance policy-

1. To begin the process of cancellation, intimate your insurance company about your decision to cancel the policy in writing. This will set the cancellation process in motion, with the entire procedure taking not more than 15 days.
2. Follow the guidelines provided by the insurance provider.
3. Sign the documents stating that you have opted for cancellation.
4. Once the cancellation process is completed, the insured will receive a letter confirming that the policy has been cancelled; any pending dues to be refunded by the insurer will also be mentioned in this letter.
5. You will also need to follow up with your insurer to collect the Certificate of Insurance. This document will come in handy when you go for a new insurance policy.

Long-Term Car Insurance Cancellation

Car insurance policies spanning three to five years, known as “long-term insurance”, have specific requirements for the cancellation process. You need to keep these points in mind if going for long-term car insurance termination -

1. Pro-Rata Refunds

If the policy is cancelled within a free look-up period, the insurance provider may refund the premium for the unused period after removing the cancellation fees.

2. Policy Transfer

In case you are selling the vehicle, you might be able to transfer the policy to the new owner.

3. No-Claim Bonus (NCB)

The cancellation may affect the no-claim bonus provided by the insurance company. Consult the insurer to know if the collected NCB can be transferred to your new policy.

What are the Consequences of Not Purchasing a New Car Insurance Policy Upon Cancellation?

Unless you don’t have a car anymore, you will need to purchase a car insurance policy again. It is illegal to ply on Indian roads without at least third-party car insurance coverage.

If you fail to purchase a new car insurance policy for your vehicle, you may face the following consequences-

1. Legal actions, including fines, suspension of licence, or imprisonment.
2. You will be liable to pay for the damages and repairs, which may be costly, leading to financial instability.
3. You may lose benefits such as a no-claim bonus if there is a a significant gap between the old and new policies.
4. Lapses in your insurance history indicate a higher risk to insurance providers, which may result in higher premiums when you apply for a new one later.

FAQs

1. Can I cancel my car insurance at any time?

Yes, most insurance providers allow you to cancel your car insurance policy anytime, with a cancellation fee.

2. Will I get a refund if I cancel my insurance mid-term?

Some insurance providers offer pro-rata refunds for unused coverages, but it is suggested to consult with the insurer to clarify these issues.

3. Can I cancel my car insurance online?

Yes, you can start the cancellation process through an email or the insurer’s website. However,  you may need to visit the insurance provider for some formalities.

4. What happens when I cancel my car insurance?

The insurance company usually provides you a refund for the unused amount of the policy. In some cases, a cancellation charge is also levied.

5. Is it mandatory to have insurance when I’m not driving my car?

Depending on the area, you may need an insurance policy, even for parked or unused vehicles.

6. What is the free look-up period in car insurance?

The free look-up period is the grace time given by the insurer during which the policyholder can review the policy terms and cancel the contract without any additional charges.

7. What documents are needed for transferring the insurance policy?

You need a new copy of the registration certificate or RC, Form 29 and Form 30, NOC from the previous policyholder, the policy document of the old car, a new application form, no claim bonus different amount, and a vehicle inspection report for insurance transfer.

Conclusion

Cancelling a car insurance policy is an important decision that needs careful planning and consultation with the insurance providers. Whether you are considering changing your insurer, selling the car, or relocating, understanding the process of terminating the policy is crucial. Ensure continuous coverage is provided by immediately applying for a new policy after the cancellation is completed.

Disclaimer: The information provided in this blog is for educational and informational purposes only. It may contain outdated data and information regarding the Insurance industry and products. It is advised to verify the currency and relevance of the data and information before taking any major steps. ICICI Lombard is not liable for any inaccuracies or consequences resulting from the use of this outdated information.