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Difference between car insurance non-renewal and cancellation

Team AckoJun 27, 2022

Understanding car insurance becomes easy once you learn a few key terms. Two such key car insurance terms are “non-renewal” and “cancellation”. They may seem to mean the same thing but are very different. This article will shed some light on the difference between car insurance non-renewal and cancellation. So, read on to improve your car insurance understanding and vocabulary!

Difference Between Car Insurance Non-renewal and Cancellation

Non-renewal vs cancellation of car insurance

Although these two terms may sound similar, they have different meanings. Let us discuss each to get a better understanding.

What is car insurance cancellation?

Car insurance cancellation refers to when car insurance is terminated before its policy period ends. The termination can be initiated from either the side of the insurer or the insured. However, it is usually initiated by the insured for preferential reasons. Insurers also have specific reasons for car insurance cancellations. We will discuss both shortly.

What does non-renewal of car insurance mean?

Non-renewal of car insurance refers to when the insurer or the insured does not renew car insurance after the policy duration ends. In this case, the insured need not provide any reasons for not renewing car insurance. However, an insurer has to give notice before the policy ends and should state a valid reason for doing so.

Parameter Car insurance non-renewal Car insurance cancellation
Time of initiation Non-renewal can take place only when a car insurance policy has ended. Cancellation is usually initiated in the middle of a policy term.
Policy premium Car insurance non-renewal does not directly affect the policy premium of the next policy cycle. However, if not renewed for over 90 days, the accumulated NCB (if applicable) may be lost. Also, you will be subject to the new prices of the new policy you choose. You may be charged a higher premium by your new insurer as a penalty for cancelling your previous car insurance policy.
Car insurance buying options If you change your mind, you can usually buy the same policy again or a different policy from the same insurer. The initial insurer may not provide another car insurance policy again. Especially if the cancellation was initiated by the insurer.

Car insurance cancellation reasons

As mentioned earlier, car insurance can be cancelled by either the car insurer or the insured. Both parties have reasons to terminate a car insurance policy. We will discuss those reasons below.

Reasons an insurer may initiate car insurance cancellation

These are common reasons why an insurer may initiate a car insurance cancellation.

1. History of unsafe driving

This happens if you have a record of being involved in numerous car accidents within a small duration of time. In such a case, your insurer may deem you a high-risk client and may initiate a car insurance cancellation.

2. Suspension of car registration

An insurer may initiate car insurance cancellation if the insured's vehicle registration has been suspended. Vehicle registration suspension can result from indulging in illegal activities like driving under the influence of intoxicating substances.

3. Deceptive claims

Car insurance cancellation may be initiated by an insurer if the insured has raised a fraudulent claim. A fraudulent claim can be a scenario in which an accident was staged or false information was submitted in order to receive a claim settlement.

4. Hiding information

If crucial information about the insured vehicle is withheld, a car insurer may initiate a car insurance cancellation. For example, not disclosing that the insured car is being used for commercial purposes.

5. Impairing medical conditions

If your insurer comes to know that you have been diagnosed with a medical condition that might hinder your driving skills, they may cancel your car insurance. Some medical conditions that are commonly considered as high-risk include Epilepsy, Dementia and Vision Problems.

Reasons the insured may initiate car insurance cancellation

Now let us look at some of the reasons why the insured may initiate a car insurance cancellation.

1. Sudden relocation

If you are shifting cities before your policy expires. And your insurer doesn’t operate in your new locality. You may consider cancelling your car insurance and buying a new one.

2. If you no longer drive

If you don’t drive anymore or own a vehicle, you may initiate a car insurance cancellation. However, insurers usually advise this only as a long-term solution and not as a quick fix.

3. Choosing another insurance policy or provider

You might buy a new car insurance policy because it offers better coverage than the one you have. Or you may switch your insurer. In both cases, you may cancel your current policy since it no longer serves any purpose.

4. If your vehicle is stolen or lost

If you have lost your car or if it has been stolen, you should probably consider cancelling your car insurance. Except if you are covered under a Comprehensive Insurance Plan. In that case, you can redeem the Insured Declared Value (IDV) of the car, as defined in the policy document.

5. Vehicle sale

If you sell your car to another person, you will no longer require your car insurance coverage. In such a case, you may cancel your insurance.

Non-renewal of car insurance reasons

As mentioned earlier, car insurance non-renewal can also be brought about by either the insurer or the insured. The following are the most common reasons for car insurance non-renewal.

As previously discussed, your car insurance can be cancelled if you indulge in illegal driving practices. However, some insurers may alternatively choose to not renew your car insurance once it expires.

2. Caught speeding

If you incur multiple speeding tickets continuously, your insurer may deem you as a high-risk client. Consequently, your insurer may not renew your car insurance for the following cycle.

3. Too many claims

If you raise several claims or are involved in multiple accidents during a policy term, an insurer may perceive you as high-risk. Consequently, the insurer may abstain from carrying out car insurance renewal for the following cycle.

4. Changing locality

This is similar to the reason stated under car insurance cancellation. If you are relocating to a city that your insurance provider does not cover, you may choose to not renew your car insurance policy and opt for a different one.

5. Discontinued coverage

Sometimes car insurance providers decide to discontinue a particular coverage under a plan. And usually, the updated plan would come to effect only in the forthcoming cycle. In such a case, you may choose not to renew your existing car insurance plan and opt for a better one.

How to get a car insurance policy after non-renewal or cancellation?

To get another insurance, we recommend that you buy car insurance online. This will give you a birds-eye-view of your car insurance options. So, you can choose a policy that doesn’t get affected by previous car insurance non-renewal or cancellation.

What will happen if you do not renew your car insurance?

It is essential to get new car insurance if your current one has been non-renewed or cancelled. The reason being that it is legally mandatory to carry valid insurance while driving on Indian roads and it is a punishable offence not to do so. Check how to renew expired car insurance blog for more details.

Take away

Although car insurance non-renewal and cancellation may intuitively seem similar, they have very different meanings. Car insurance cancellation refers to when a policy is terminated before its expiry. Car insurance non-renewal, on the other hand, refers to when a policy is not renewed after its expiry. Also, if you encounter either of these, buy a new insurance policy as soon as possible to avoid complications.

Frequently asked questions

Below are some of the frequently asked questions regarding car insurance non-renewal and cancellation.

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Is it possible for my car insurance to be cancelled at any point?

An insurer cannot cancel a plan after 60 days from its initiation. Nonetheless, with prior notice, a motor insurance can be cancelled by an insurer if the policy premium is unpaid or information submitted is false or the insured’s driving license becomes invalid. The insured has the right to contest these car insurance claims.

Can automatically renewed car insurance be cancelled?

When a car insurance policy becomes active there is usually an initial “cool off” period of around 14 days. During this time you can cancel a policy without incurring any charges. You can cancel your policy even after that, but you may have to bear the fee applicable for the days already covered.

If I cancel my car insurance policy, will I get a refund?

Yes, you will be eligible for a refund provided you fulfil the criteria mentioned in the article “How to Cancel A Car Insurance Policy and Get A Refund?”.

Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on industry experience and several secondary sources on the internet; and is subject to changes. Please go through the applicable policy wordings for updated ACKO-centric content and before making any insurance-related decisions.

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