Cancellation of Car Insurance and Refund Process – Detailed Analysis
Motor insurance is mandatory in India as per the Motor insurance Act. Any vehicle plying on road needs to have a valid third party motor insurance policy; failing would result in fine as per the law. There are certain times when the policy needs to be cancelled and the customer needs to know the process and conditions under which a motor insurance policy can be cancelled.
Same effort should be put before cancelling a
motor insurance policy which is put while purchasing the car. The consequences and advantages of car insurance cancellation should be thought well before taking a decision.
Reasons for Cancellation of Car insurance:
Below might be the reasons for policy cancellation:
Duplicate policy: There might be instances when you have two or more car insurance policies unknowingly. This can be due the below situations:-
- Auto renewal of Car insurance opted, amount debited from your account and the renewal policy sent on your mail.
- Someone else in your family might have renewed car insurance without informing you.
- You might renew again if your payment status not known and the policy is expiring shortly.
Car is sold: Normally all car insurances are valid for a period of 1 year from the date of policy start. But if you have taken a long term policy and you are planning to sell your car, then there is a little chance for you to wait till the insurance is over to sell the car. In such situations it is necessary to cancel the insurance policy and get the pro rate premium refund. The new owner of the car would be responsible to take insurance in his name to avoid any legal issues arising out of
third party damages.
Car is to be scraped: If your car is old and obsolete, then you would be selling it for scrap. In such situations you need to cancel the policy and apply for refund.
Dissatisfied with current insurer: It happens in some cases that most of the customers are dissatisfied with the insurance company after the sale is done. There are a few scenarios where the customer is frustrated to such an extent that he /she would like to cancel the policy.
Process of Car insurance Cancellation:
Step 1: You need to inform your insurance company or broker in writing mentioning the reason for cancellation of your car insurance. You would receive a call from the insurance company to enquire the reason for cancellation; they will try to retain you if possible.
Step 2: If you are still not satisfied with the insurer, then the policy cancellation process will be initiated which takes up to 15 days. Before cancellation they would ask for some documents depending on the case; in case of “switching insurance company” you need to submit new insurance policy. In case of “Selling your car” they might ask for Sale Deed.
Step 3: Once all the required documents are submitted from your end, insurance company will verify them and your cancellation request will be approved.
After the car insurance policy is cancelled next thing to be done is premium refund to the customer account. The following are the few scenarios where the refund is processed differently.
Cancellation before the start date: If the policy is cancelled before the start date of the new policy, then the full premium will be refunded to the customer’s account.
Cancellation after the start date: In case the policy is cancelled after the risk start date then the premium is refunded on a pro-rata basis to the customer. This is because the insurance protection has been given to your car till the time of cancellation.
The turnaround time (TAT) for the amount to reflect in your account would range between 7-14 days. It is advisable to check with your bank on the refund status.
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