How to Cancel a Car Insurance Policy?

Car insurance is mandatory in India, but there may be situations where you need to cancel your existing policy. For instance, selling your old car or switching your current insurer may require cancelling your policy. But can we cancel the car insurance policy? Read on to decode this further and understand how to cancel a car insurance policy in India.Read more

Reasons Behind Car Insurance Cancellation

There may be situations when a policyholder would want to cancel their four-wheeler insurance policy. Here are some most common reasons for car insurance cancellations:

1. Selling a Car

   If you have purchased a long-term car insurance policy and choose to sell your car, then you must consider cancelling your car insurance. Even if you have purchased a yearly comprehensive car insurance policy and still have time left for expiry, you can cancel your old policy and transfer the documents to the new owner.

2. Switching the Insurer

   Another reason for car insurance cancellation is if you are not satisfied with your current insurer and decide to go for a better option. In such cases, you can cancel your car insurance with the previous insurer and change the insurer after submitting the required documents.

How to Cancel Car Insurance?

You can easily cancel your car insurance policy at any time; all you need to do is submit the required documents to your insurance company. Follow the steps mentioned below to cancel your car insurance:

1. Inform the Insurer

   As soon as you plan to cancel your car insurance policy, you must inform the insurer about the cancellation. You can get in touch with your car insurance company via email or call and tell them to start the policy cancellation process.

2. Submit the Documents

   The insurer may ask you to submit a declaration stating the reason to cancel the plan. You may also need to sign a document to cancel your policy. Usually, this process is different for different companies, so make sure to talk to your insurer.

3. Get the Certificate of Insurance

   Once your car policy is cancelled, the insurer will give you a car insurance certificate stating the details of the cancelled policy, along with the accumulated No Claim Bonus (NCB) till cancellation. Make sure to collect the NCB certificate, as it will help you in claiming your accumulated NCB while purchasing a new car insurance policy.

4. Check for the Refund Amount

   When you cancel a car policy mid-term or soon after purchasing it, the insurer may refund you the premium amount based on the policy terms and conditions.

   • If you have cancelled the policy before it starts, you are likely to receive a full refund.
   • If you have cancelled car insurance after the start of the policy, you will be getting a refund on a pro-rata basis, as you have used your policy for some days.
   • Policyholders will be issued a refund in their original payment method within a specific timeline.

5. Don't Forget to Buy a New Car Insurance Policy

   While cancelling your policy, if you state the reason as 'Switching insurer', your insurance company may ask for a new car insurance policy. Thus, in any case, do not forget to buy a new car insurance policy from the new insurer. Even if you are selling your old car and purchasing a new one, it is mandatory to at least have a third-party insurance policy.

   If you have had an unsatisfactory experience with your previous insurer, make sure to compare third-party and comprehensive car insurance online from Policybazaar.com so that you can get the best one this time.

Car Insurance Cancellation Charges

If you cancel a car insurance policy, you might be required to pay the cancellation charges, which vary from insurer to insurer and also depend on the date of cancellation. Here is how the refund is usually decided during a car insurance cancellation:

*Disclaimer: It is important to contact your insurer to know the exact terms, conditions, and charges for cancelling your car insurance policy.

How to Cancel Long-Term Car Insurance?

The cancellation of long-term policies that have a 3-year third-party and 1-year own damage policy tenure will have standard conditions. Such policies shall have a free-look-up period of 30 days from the date of policy inception. If a policyholder has cancelled the policy within this look-up period, they will be entitled to a refund on a pro-rata basis.

The long-term own damage policy can be cancelled during its tenure by giving a cancellation notice. In such scenarios, the premium refunded will be:

1. A full refund of the future year's premium
2. For the year in which the policy has been cancelled:
• If no claims are reported: Refund of pro-rata premium
• If claims are reported: No refund of premium
3. GST and other government taxes to be refunded to the extent permissible by the concerned authorities.

Wrapping Up!

Cancelling your car insurance without having an active alternate policy can result in legal penalties, as driving without valid insurance is a punishable offence. If you plan to cancel your car insurance, change insurers, or sell your car, it is advisable to purchase a new policy first and then cancel the old one. If you have earned a No Claim Bonus, ensure it is transferred to your new policy so that you do not lose this benefit and get your NCB certificate.