Every car insurance policy comes with validity. While insurance for brand new cars come with an initial validity of three years, eventually, they have to be renewed annually.
If you ever believed that buying insurance for your car just one time will be enough, sadly, that’s far from reality.
Every car insurance policy has an expiry date. Whether you have a third party insurance or comprehensive cover, it will be valid for a fixed period and needs to be renewed regularly. The important thing is to renew your car insurance before the expiry date of your ongoing policy. If you own a car, you may have noticed getting reminders from your motor insurance company to renew your car policy.
Have you ever wondered why is it important to renew your car insurance policy before the expiry of the ongoing policy?
Let’s find out.
Here are six reasons why you must renew your car insurance policy on time:
A car insurance policy is essential to provide financial coverage to your car. It also provides other benefits, such as a No Claim Bonus, cashless repair facility, zero depreciation cover, etc. to the insured vehicle.
However, the car insurance coverage will be available to your vehicle as long as your policy is valid. Besides, you need continued and uninterrupted coverage over the years to avail benefits like No Claim Bonus.
The only way to ensure continued coverage for your car is by renewing your car insurance policy on time. If you forget to renew your car policy before the expiry of your existing policy, your insurance coverage will break and your motor insurance company will not be legally liable to cover any financial liabilities arising out of your car.
As per the motor laws of India, every car must be covered under a valid car insurance policy with a minimum of third party cover. This means your car should remain covered under insurance at all times as long as it is used on public roads. If you fail to renew your policy on time, your car insurance coverage will cease to exist.
Driving an uninsured car is illegal in India. If you drive your car with an expired insurance policy, you will violate the motor laws of the country. In case you are caught by the traffic police, you will be heavily fined and/or sent to jail for up to three months.
At present, the fine for driving an uninsured car is Rs 2000 for the first offence and Rs 4000 for the second offence.
When you have a car insurance policy, any loss or damages arising out of your car is covered by your motor insurer. Whether your car has suffered damages or has caused damages/injuries to the third party, the resulting financial liability is taken care of by your insurer.
But if you fail to renew your car insurance policy leading to its expiry, your motor insurer has no legal liability to cover the financial liabilities arising out of your car. Even during the grace period, your insurer will not cover any loss or damages resulting from your car.
As a result, you are forced to pay for the damages sustained or caused by your car from your own pockets. The situation can get financially distressing if you cause injuries to a third party resulting in his/her death. In such a case, you may be legally liable to pay compensation to the victim’s family, which can range from a few lakhs to a few crores, without any financial aid from your insurer.
No Claim Bonus is a reward granted by motor insurance companies to car owners for not raising any car insurance claim in the previous policy year. If you do not raise a single claim in a policy year, your insurance company will grant you a discount on renewal premium or No Claim Bonus (NCB).
NCB can be accumulated. The minimum NCB granted to a policyholder is 20% and can be accumulated to go up to 50%. To achieve an NCB of 50%, you should have not raised any car insurance claim for the last five consecutive policy years.
However, you can lose your accumulated NCB if you do not renew your car insurance policy for more than 90 days after the expiry of your policy. Your NCB stays intact for up to 90 days after your previous policy expiry. But if you fail to renew your policy even in this period, you will end up losing your accumulated NCB.
When you renew your car insurance policy on time, your vehicle is not subject to inspection and the entire process is hassle-free. But if you fail to renew the policy on time, you are considered a careless car owner by the insurance company. As a result, when you try to renew your car insurance policy after a gap, the insurer might feel the need to inspect your car.
An inspection of your car may create an unnecessary hassle for you. Moreover, it may lead to the discovery of certain damages or regular wear & tear of your car. This may result in reducing the Insured Declared Value (IDV) of your car or hiking the premium amount.
As you know, a break in your car insurance policy may lead to a hike in your insurance premium. This happens because you will have to buy insurance for your car from scratch that may lead to expensive policies. Moreover, the insurance company will hike your premium as soon as they come to know of your expired policy as you will be considered a careless driver. As if that’s not enough, you will lose your accumulated NCB that may have reduced your car insurance premiums if only you had renewed your policy on time.
Summing It Up
Car insurance renewal on time is important for multiple reasons. The expiry of your policy will not create an unnecessary hassle for you but may also result in a higher premium amount. Besides, if you end up injuring a third party person, the compensation amount can empty your savings. Therefore, always remember to renew your car insurance on time and set up reminders to not forget the policy expiry date.
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