All types of insurance policies have an expiry date attached to them. If you are satisfied with your policy, you tend to renew it for another specific term. However, there could be instances wherein you would want to terminate the policy. In some cases, you need to pay for the termination of the policy. Car insurance cancellation charges are an example.

Reasons for Cancellation of Car Insurance Policy

• Found a better alternative: You have signed up for car insurance with a particular insurance company. It is, however, not mandatory to renew it with the same insurer. The car insurance market in India is vast, and there could be insurance providers offering a better deal for your car. In this scenario, you would need to cancel your existing car insurance policy and pay the car insurance policy change fee.

• Selling your car: If you are looking to sell your insured vehicle, there exists no need to hold on to its attached insurance policy. You may also receive a refund from your insurance provider, depending on the stage of term your policy was in.

• Car Theft: In case your vehicle has been stolen and you have only purchased the mandatory third-party liability car insurance, it would be rendered useless to provide any compensation in this case. You may choose to discard the policy henceforth.

Early Bird Gets the Worm

The proverb holds true in the context of cancellation of your car insurance policy. Typically, every car insurance company provides some time window wherein you can change your mind and terminate the policy. Hence, within that specific window, if you make up your mind and decide to go ahead with a different insurance provider, you may be able to discard your existing policy without paying any car insurance cancellation fee.

Early Cancellation Fee

There could still be some car insurance providers who will charge an early cancellation fee, even if you were to put it in the cancellation request within the initial days of buying the policy. This amount, of car insurance early cancellation fee, may be significantly lower than what would have been charged if you were to cancel the policy later on in the policy term. It is calculated on a pro-rata basis the days your car insurance policy was active.

What accounts for the cancellation charges?

A car insurance company holds information and processes paperwork for very many policyholders. Digitalisation has made a lot of these processes hassle-free, but there are still costs attached to maintaining this information. This could vary, but most car insurance companies levy policy cancellation charges to cover the administration costs of cancelling your policy. There could also be scenarios wherein the insurance company has to send out your policy documents to your physical home address, and they would want to include such sundry costs in your car insurance cancellation charges.

Refunds from Cancellation

When you put an end to your car insurance policy, it is important that you also check on the refund status of your premiums with your insurance provider. As an insurance company looks to levy charges for the cancellation, it also holds the responsibility of returning the premiums, if applicable. Say, you have an annual term car insurance policy, for which you have paid the premium at the start of the year. If you bring up your policy for cancellation within the first two months of the year, the insurance company is liable to credit back the pro-rated premium for the remaining term of 10 months.

Conclusion:

Putting an end to your car insurance policy is not very complicated. There are various online and offline avenues which make these cancellations hassle-free. The key is to be cautious enough to not be taken advantage of through unnecessary charges, in the name of cancellation fee.

Disclaimer: The above information is indicative in nature. For more details on the risk factor, terms and conditions, please refer to the Sales Brochure and Policy Wordings carefully before concluding a sale.