How to Cancel A Car Insurance Policy and Receive A Refund?

As purchasing car insurance is important, simultaneously canceling the car insurance is too significant. Are you planning to cancel your ongoing policy? If yes, then this article is for car insurance policyholders like you. There can be several reasons for discontinuing your current policy, however the idea is to understand what the process of cancellation is. Many car owners are not accustomed to canceling. The cancellation of the car insurance policy is not that difficult only if you are aware of the right process.

If you are following the wrong steps, the insurance company will not approve the cancellation, and as a result, you will not receive the deserved documents. Understanding every detail of car insurance is essential to getting rid of unnecessary headaches. When the insurance policyholders take the required steps, the cancellation is easy. In this master guide to car insurance cancellation, we will walk through the reason for cancellation, steps, and refund process coherently. Let’s start the journey.

Easy Steps For Cancelling Your Car Insurance Policy

• As there is no standardised format for cancelling a car insurance document, different companies follow various steps to cancel their insurance policies. However, all the insurers, more or less, have the same procedure in common. Generally, these are the most common steps that car insurance companies are following:
  • Step 1: First of all, go through your existing policy carefully. You have to check whether your policy is in the notice period, if there is any cancellation fee, or if you are eligible for any refund. These details will help you before going forward and applying for the cancellation.
  • Step 2: After knowing the information in detail, now you can contact your insurance provider. Any policyholder either directly applies for cancellation through the official website or mobile apps. The intention behind this is to ask for the cancellation procedure. The insurer’s representative may ask you the reason for cancellation. 
  • Step 3: Your car insurance company may tell you to fill out the cancellation form as a part of the cancellation process. In the cancellation form, you have to mention your personal details, reasons for cancellation, policy number, and other policy details. Although this written cancellation request varies with the insurers.
  • Step 4: Returning any necessary documents, like a smart card or insurance certificate related to insurance, is essential. As you want to cancel the car insurance, these documents are no longer your belongings. Always get in touch with the insurer to get this information.
  • Step 5: Some insurance companies have some terms and conditions attached to the cancellation. With the cancellation, there is a cancellation fee attached, which you must pay.  
  • Step 6: Now, you can request a refund after the cancellation. To process it further, the insurance policyholder needs to provide the bank account number.
  • Step 7: At the end, request the insurer for the cancellation certificate. This certificate is proof of the existing car insurance. The cancellation certificate includes the cancellation date, policy ID, and policyholder’s name as well. 

Refund Amount After Cancelling Car Insurance Plan

Refund is an integral part of the four-wheeler insurance cancellation. Most of the automobile insurance providers allow refunds according to their rules and regulations. Generally, the insurers calculate the refund on the basis of unused days. For instance, if you pay the entire premium upfront for a one-year policy and request cancellation after 6 months, then the refund for the remaining 6 months will be paid. This refund is on a pro-rata basis.

While you cancel the policy before the start date of the car insurance, then the total amount will be refunded. For example, you buy the policy on the first day of the month, and the policy will be enacted on the 15th of the same month, but you cancel it on the 13th of the month. On the other hand, in a 3+1 year long-term policy, if you cancel it after 1 year, you get a full refund of the next 2 years’ premium.

In the pro-rata basis refund, there must be no claim during the period of the policy. There will be no refund if any claim is approved. Being a responsible car insurance policyholder, you should read the insurance paper properly. The maximum TAT (turnaround time) for the crediting of the refund is two weeks. You can check your bank account after 14 days, and the amount must be reflected in the bank account.

The cancellation fee, such as GST and minimal taxes, will be deducted from the refund amount. The refund source will be the same as where you purchased the insurance. All the car owners who would like to get a refund against cancellation must remember all these things. This refund process is not that difficult to do and get.

Reasons For The Cancellation Of A Car Insurance Plan

According to the Motor Vehicle Act, it is mandatory to have car insurance to adhere to traffic rules. The insurance gives you immense benefits in a road accident by giving claims. However, car owners must have various reasons to cancel their present insurance. Without a valid reason, the respective car insurance company will not allow you to cancel. Here are the most common causes for which you can apply for a car insurance policy:

Selling The Car

One of the most relevant reasons for canceling car insurance is selling your car. Whether you buy long-term insurance, such as for 3-5 years, or short-term insurance, such as for 1 year, and decide to sell the car, then it is a valid reason. If the new vehicle owner is not ready to transfer the insurance policy, you have no other way but to cancel it. Under this circumstance, your car insurance policy is of no use, and you should request the concerned insurance policy to cancel it as soon as possible.

Buy a New Car

While you are feeling your existing car model is old, and you would like to purchase a new one, then there is no scope for continuing the current insurance policy. As the model of the car or the manufacturing company of the vehicle is different, it is justified that you cancel the insurance policy and buy brand new car insurance where your new car details will be mentioned.

Shift or Port to New Insurer

For many reasons, the car insurance policyholder is dissatisfied with their current insurer. The reason can be anything, such as a claim settlement issue, a rapidly increasing insurance premium, a complex renewal procedure, less sum assured, or any other benefit-related issue. These kinds of unhappiness may compel you to make the decision to cancel.

Car Gets Stolen

If you have faced the mishap of car theft, then it is truly unfortunate. Hopefully, no car owner will face this kind of incident in the future. As you are the victim of car loss, you must cancel the policy and claim the refund only if you are eligible for it. Few car owners are aware of this fact that they should cancel the insurance policy if your car is stolen.

Refund Amount After Cancelling Car Insurance Plan

Refund is an integral part of the four-wheeler insurance cancellation. Most of the automobile insurance providers allow refunds according to their rules and regulations. Generally, the insurers calculate the refund on the basis of unused days. For instance, if you pay the entire premium upfront for a one-year policy and request cancellation after 6 months, then the refund for the remaining 6 months will be paid. This refund is on a pro-rata basis.

While you cancel the policy before the start date of the car insurance, then the total amount will be refunded. For example, you buy the policy on the first day of the month, and the policy will be enacted on the 15th of the same month, but you cancel it on the 13th of the month. On the other hand, in a 3+1 year long-term policy, if you cancel it after 1 year, you get a full refund of the next 2 years’ premium.

In the pro-rata basis refund, there must be no claim during the period of the policy. There will be no refund if any claim is approved. Being a responsible car insurance policyholder, you should read the insurance paper properly. The maximum TAT (turnaround time) for the crediting of the refund is two weeks. You can check your bank account after 14 days, and the amount must be reflected in the bank account.

The cancellation fee, such as GST and minimal taxes, will be deducted from the refund amount. The refund source will be the same as where you purchased the insurance. All the car owners who would like to get a refund against cancellation must remember all these things. This refund process is not that difficult to do and get.

Conclusion:

Undoubtedly, the entire process of cancelling the car insurance policy is straightforward; you just have to keep certain things in mind before applying for it. Many car owners apply for cancellation without knowing the appropriate procedure and face difficulties in getting a refund or cancellation. Steps of cancellation, reasons for cancelling the car insurance, and getting the deserved refund are all necessary in this regard. 

Whether you are shifting any other insurers, selling the car, or your car is stolen, you are eligible for cancellation of the insurance. If you are one of those, this article is certainly beneficial for you. Isn’t it? As a responsible car owner, you must have in-depth knowledge regarding car insurance.

FAQs:

Q1. Can I get a refund if I cancel my car insurance policy?

Ans: Yes, generally, you get a refund if you cancel the insurance policy. Although, insurers impose terms and conditions such as no claim. You will get the refund according to the remaining days of the insurance policy and a full refund before the start of the policy.

Q2. If my car is stolen, can I apply for cancellation of the insurance policy?

Ans: Of course, you should immediately contact the insurance provider and request them to cancel the ongoing car insurance.

Q3. Within how many days after the cancellation will I get the refund?

Ans: Usually, the turnaround time for the refund is 14 days or two weeks. All the insurers make the payment before this deadline.

Q4. Can I request cancellation if I want to shift to a new insurer?

Ans: In this highly competitive market, it is natural to shift to a new insurer. While you are not happy with your current insurance provider, you ask them to cancel the policy as soon as possible.

Q5. What is a pro-rata basis refund?

Ans: Pro-rata refund is very simple and easy. The refund is equivalent to the number of days remaining in your present insurance policy.

Also Read 

How To Cancel Car Insurance Policy Anytime?

Reasons To Cancel RC After Scrapping An Insured Car

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.