Your car insurance policy is a compulsory requirement if you want to adhere to the rules put down within the Motor Vehicles Act, 1988. That's the reason, should you own a car, you should possess a valid auto insurance cover onto it. However, for some reasons, you may opt for a cancellation of the car insurance policy. For instance, if you think you've bought a wrong policy and want to change to a different one, you might like to cancel your overall plan and change it with another one. Similarly, if you're relocating to an international location and leaving your car behind, you might want to cancel your policy and claim any refunds. Are you aware how such cancellations work?
Car insurance cancellations are mid-term cancellations which are done once you have bought the policy. Let's know how the cancellation works –
Mid-term cancellation of car insurance policy
If you cancel the insurance policy after you have bought it, it is called mid-term cancellation of the policy. In such cancellations, the fees are refunded back. However, the insurance company retains some portion of the premium for that cover presented to you till you cancel the plan. The proportion of premium retention depends on the period after which the insurance policy is cancelled. If cancellation is done within the starting months, 75% to 80% of the fees are refunded. This percentage reduces as the policy period increases. If cancelled after 6 to 9 months of coverage, there can be no premium refund.
How to cancel an automobile insurance policy
If you intend to cancel your vehicle insurance policy, here are the steps to cancel car insurance in India –
- Buy a brand new policy
You should first obtain a new car insurance before cancelling the existing one. If your replacement policy isn't availed of, cancellation may not be allowed. The insurance company might require you to provide proof of a new 3rd party cover before cancellation is allowed. Moreover, if you don't purchase a new policy, you face penalties for driving uninsured. Additionally you bear the risk of 3rd party financial liability and damages suffered by your car. So, buy a new policy before cancelling a current one for continued coverage and also to provide proof of cover to the existing insurance company.
- Inform your insurer
The next and the most obvious step towards cancellation would be to inform the insurer. You are able to write a letter to the company informing it regarding your need to cancel the program. Alternatively you can send an email. The insurance company would acknowledge your request and start the cancellation process. The procedure might take 7 to 12 business days.
- Take guidance in the insurer
Your insurance company can help you with your auto insurance cancellation process. It would request you to submit a declaration stating your intention to cancel the program. You would have to sign the declaration and submit it using the company. You would also need to submit evidence of another insurance plan that you've bought as a replacement to the policy being cancelled. Once these formalities are complete, the organization would issue a notification cancelling your policy.
- Avail the vehicle insurance certificate
After the policy is cancelled, you need to get an automobile insurance certificate showing the details from the cancelled policy and also the no claim bonus accumulated till cancellation. This certificate is a vital document. It might assist you to make use of the accumulated no claim bonus in your new car insurance.
- Claim reasonably limited refund
If you are cancelling the plan during mid-term, you may be permitted to get a premium refund. The insurance provider would refund the premium either in your bank account or issue an inspection inside your name.
Here are the consequences of lacking car insurance
Long term car insurance and cancellation
With the current alterations in car insurance policy policies, cars and bikes bought on or after 1st September, 2021 would have to go for long-term 3rd party coverage. So, for those who have bought a car on or after this date, you'll want bought a long-term 3rd party cover for three continuous years. In these long term policies, cancellation of third party coverage is not allowed. Once taken, you cannot cancel the 3rd party cover prior to the completing Three years. However, if the car comes, not in use, lost or there's double insurance around the car, the insurance policy could be cancelled. Similarly, should you show the insurer you have committed to the 3rd party policy of some other insurance company, cancellation of existing third party cover is allowed. The insurer would then refund the pro-rated third party premium once the policy is cancelled.
Things to remember
If you have discarded your car and not buying a new one, you can still support the insurance certificate you received upon cancellation of your car insurance. The accumulated no claim bonus is valid for 3 months after cancellation. So, you can use the power for future policies.
Though rare, car insurance cancellations do occur. If you're also thinking of cancelling your car insurance policy, remember the above-mentioned points.
