When you look at car insurance policy documents, you may come across many technical terms or jargons that you may find hard to understand. Two such car insurance-related terms that are most commonly misunderstood and misinterpreted are ‘non-renewal’ and ‘cancellation.’
At the outset, non-renewal and cancellation may seem to mean the same thing, they are totally different and have different meanings. If you feel confused about the two, in this blog, we will shed light on the difference between these two terms.
What is car insurance non-renewal?
As the name suggests, car insurance non-renewal means the policyholder or the insurance company does not renew the policy after it expires. As a policyholder, if you don’t want to renew your policy, you need not provide any reason to the insurance company. But the insurance companies must give you a notice before the policy expires and a valid reason for non-renewal of your policy.
What is car insurance cancellation?
Car insurance cancellation is when the insured or the policyholder terminates their policy before its expiry period. Car insurance cancellation can be initiated by either the insurance company or the policyholders. In most cases, the latter initiates it for preferential reasons. Insurance companies, too, have specific reasons for cancelling the car insurance policies.
Car insurance non-renewal vs cancellation – knowing the difference
The difference between car insurance non-renewal and cancellation can be drawn based on three critical parameters, which are discussed below:
• Policy premium
Car insurance non-renewal does not have any direct impact on the policy premium in the subsequent policy year. However, if you don’t renew the policy up to a specific period after its expiry (usually 90 days), you face the risk of losing the accumulated NCB and other benefits. Also, the insurer may increase the premium for the new policy you choose.
If you cancel your car insurance before its expiry, and purchase a new policy from a different insurer, they may charge you a higher premium as penalty for cancelling your previous policy.
• Options to buy back the policy
If, for any reason you did not renew your policy, and later change your mind, you can buy the same policy or a different one from the same insurance company.
If you cancel your policy before the expiry date, and later try to buy the same policy again, the insurer may deny your request. If the policy was cancelled by the insurance company, you cannot buy back the same policy.
• Time of initiation
As a policyholder, you can choose to not renew the policy after its original tenure has expired.
You or the insurer can initiate the policy cancellation anytime during the policy term.
Now that you know what car insurance policy non-renewal and cancellation means and the difference between the two, you can make informed decision about your policy. It is advisable that you avoid non-renewal or cancelling your car insurance policy.
As long as you own a car and take it out on public roads, you must have a valid insurance cover for your vehicle. It is mandatory by law and necessary from a protection and safety point of view.
If you have not purchased a car insurance policy, you can consider buying the Kotak Car Secure, a comprehensive car insurance policy from Kotak General Insurance. The plan offers a wide range of benefits and has an affordable premium. You can visit the Kotak General Insurance website to know more about it and complete the purchase.
Disclaimer: The content provided is for education and informational purpose only, none of the information contained in our blog amounts to any form of opinion or advice. Please go through policy related documents carefully or consult an expert before making any insurance-related decisions.