Significance of Grace Period on Renewal in Car Insurance

Why is Car Insurance Renewal Required?

Every car insurance plan comes with a fixed tenure of 1-3 years and once the date of expiry is over, the policy loses its legal validity and has to be renewed again. Generally, car insurance plans remain valid for 12 months. According to the rules of the Insurance Regulatory and Development Authority of India(IRDAI), all 4-wheeler owner-drivers are required to renew their car insurance before its expiry date, and for this reason, a grace period of 15-30 days is provided.

If the car insurance is not renewed before the expiry date, it will lead to the end of their contract with the insurer and they will no longer be legally liable to provide the policyholder any coverage, whatsoever. However, many car insurance companies provide their customers with a grace period after the expiry date to renew their car insurance without losing the benefits.

What Happens When Car Insurance Expires?

The first thing that happens when your car insurance policy lapses is that your legal contract with the insurer becomes null and void. This calls for the following legal and financial consequences for you:

• No coverage/protection: A lapsed car insurance policy means that you will not have the privilege to raise any claim. Your insurer will not be liable to provide you with any compensation in such situations.
• Loss of no claim bonus: The benefits you earned as a reward for not raising any claim in the previous policy periods is called the no claim bonus. If you do not renew your car insurance within 90 days of the date of expiry, you will lose all the accumulated no claim bonus you have earned till now
• Legal consequences: Not having a valid driving license invites legal trouble as driving a non-insured car in India is illegal. Driving without insurance will attract traffic fines or challans and can even call for imprisonment.
• Re-inspection: If you have failed to renew car insurance before its expiry and plan to renew it again after it has lapsed, your vehicle will be subject to re-inspection by the motor insurance company.
• No third-party liability: In case you are caught up in an accident and end up injuring a third party or their property, be ready to also face legal liabilities.

What is Grace Period?

In case your policy period has expired and you weren’t able to renew it, you need not worry as many car insurance companies provide their policyholders with a period of grace for car insurance renewal which is generally around 30 days or more.

Please note that the grace period is not an extension of the coverage of the lapsed car insurance policy. The car insurance will still be considered expired. The insurance company will reject all claims during this period as the car insurance policy is invalid. The grace period simply gives an additional window to the policyholder for car insurance renewal by paying the required premium.

Significance of Renewing Insurance in the Grace Period

The window of the grace period generally ranges between 30 to 90 days depending upon the insurer. This grace period is given to the policyholders to renew that car insurance at the earliest to be able to drive legally on the roads as well as retain their policy benefits. Following are some of the benefits of a grace period in a car insurance policy:

1. Retain no claim bonus: The grace period will secure you against losing your accumulated no claim bonus after the expiry of your car insurance. Make sure that you renew car insurance at the earliest, in the grace period, to retain the no claim bonus.
2. No vehicle inspection: Car insurance companies generally re-inspect vehicles if their car insurance is renewed after the expiry. Your insurer may waive the inspection process if you renew car insurance during the grace period.
3. Lower cost of premium: Once the car insurance policy is expired, it becomes quite tedious as you will be required to find a new car insurance plan to purchase and even pay a higher premium amount for it. The grace period will help you save on this increased cost of the premium by renewing your existing car policy.

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Here’s What You Should do When Car Insurance Expires

The first thing you should do is to immediately contact your insurer as they will consider the renewal during the grace period. If you wish to apply for a new policy or are considering changing your car insurance company, ensure that you compare several online policies and choose the best car insurance for your vehicle. Additionally, make sure that you check with your insurer if they will be carry-forwarding your no claim bonus in such situations.

Conclusion

Car insurance renewal is as important as buying car insurance. It is critical to renew your car insurance policy before it expires, otherwise, you can face serious consequences. Those who often miss out on renewing their motor insurance before the expiry date can take advantage of the grace period offered by insurers to save their car insurance plans from getting lapsed.