Car Insurance Cancellation Vs Non-Renewal: Key Differences

Car insurance policyholders must understand the difference between cancelling a policy and non-renewing a policy. Both terms offer a similar meaning and imply a loss of risk coverage for the policyholder. However, there is a vast difference between these two terms in a car insurance policy. Read the detailed information below to learn more about car insurance cancellation and non-renewal.

Read more

What is Car Insurance Cancellation?

Cancellation refers to terminating the car insurance policy. The insurer or the insured can cancel the policy within the policy period for the following reasons:

Reasons for Car Insurance Cancellation

1. Irregular/Non-payment of Policy Premiums: If you skip timely car insurance renewal, your insurance provider can cancel your policy.
2. Misinformation: The insurance provider can cancel your policy if you have hidden information about yourself or your car.
3. No valid driver's license: If you are the car's driver and your driving license has been cancelled or suspended, sometimes the insurance provider may cancel your car insurance policy. Although it is not a standard rule, license cancellation makes you an illegal driver, thus posing a high risk to insurers.
4. Impaired medical condition of the driver: If the car driver's medical condition is not ideal and impairs their driving, the insurance provider will cancel the car insurance policy.
5. Cancellation by the Insured: You can cancel the car insurance policy if unsatisfied with the insurer (such as high premiums or poor claim settlements), sell the car, or find a better deal with another insurance provider.

Impact of Cancelling Car Insurance

1. Signals high-risk behaviour of the insured party, alerting other car insurance providers.
2. Other car insurance companies may offer limited coverage.
3. Higher premiums may be offered to customers whose car insurance policies have been cancelled by their former insurance providers.
4. Other insurance providers may refuse to offer car insurance policies to high-risk customers.
5. If you cancel the policy, you may not get a refund for paid premiums, but only for unpaid ones. A cancellation charge will also be applicable. You must check the insurer's terms and conditions, as some providers levy hefty penalties.

Car Insurance Non-Renewal

Non-renewal refers to the insurer's or the insured's decision to not renew the car insurance policy and let it expire.

Reasons for Non-Renewal of a Car Insurance Policy

1. Poor driving record: Insurance providers do not renew car insurance of policyholders with poor or risky driving records.
2. No valid RC: If your car's registration certificate (RC) has been cancelled or suspended, the insurer may not enter into any contract for car insurance renewal.
3. Relocation: If the policyholder has moved or relocated to a region outside the insurance provider's coverage area, the insurer may not approve your car insurance renewal.
4. False claims: Submitting too many claims within a policy year may result in the non-renewal of the car insurance policy.
5. Lack of transparency: If the policyholder has withheld information regarding the car's details, usage, driver's information, etc., the insurance company may not renew the car insurance policy.
6. Personal choice: Some policyholders do not renew their existing car insurance policies because of their individual decisions. For example, one may renew a car insurance policy because they want to switch insurers.

Impact of Non-Renewal

1. Non-renewal of your car insurance policy may lead to losing your NCB (No Claim Bonus). Essentially, NCB in car insurance is the reward the insurer provides to the policyholder for not raising any claim in the policy year. It is a rebate on your car insurance renewal premium for the following year.
2. If you have not renewed your existing policy within the stipulated time limit, you may have to pay higher premiums on your new car insurance policy.

Difference Between Car Insurance Cancellation and Car Insurance Non-Renewal

Here's a table highlighting the key differences between car insurance cancellation and non-renewal:

How to Avoid Cancellation or Non-Renewal of Your Car Insurance Policy

1. Pay your car insurance policy payments diligently. Avoid skipping payments.
2. Maintain a good driving record. Avoid lending your car to risky or unlicensed drivers.
3. Provide authentic details about your car - make, model, age, modifications, etc.
4. Do not hide information. Inform your insurance provider if you use your car for commercial purposes.
5. Opt for a car insurance policy from a reliable provider that meets your coverage needs and budget. Check quotes from different insurers, compare policy features & benefits on Policybazaar.com before you renew car insurance online to avoid changing providers due to an unsatisfactory experience.

Conclusion

The insurer or insured can initiate cancellation and non-renewal of a car insurance policy. Typically, cancellation happens when the insurer/insured is unsatisfied with the other party or the policy terms are not upheld. However, a non-renewal usually occurs due to the insured's choice to move from one insurance provider to another, or for any other reason. Policyholders must read the policy documents carefully to comply with the terms and conditions of their car insurance policy.