Car Insurance Non-Renewal vs Cancellation

As is evident from the term, car insurance cancellation means the cessation of the insurance coverage policy by the policyholder or insurance company at a time before the expiry period ends. Usually, it is the policyholder who has all the rights to cancel the insurance policy any time prior to the tenure ending. However, in certain cases, the insurance company can also avail of this right, mainly depending on these common adversities:

• Misinterpretation of details
• Failing to pay premiums
• Cover-up of information

Nevertheless, the policyholder will get a notice from the insurer, along with the relevant reasons for the same.

On the other hand, a car insurance non-renewal is when the policy is not renewed after the specific tenure gets over. While the policyholder has all the right to not renew the insurance policy without being legally obligated to give the insurer reasons, if the insurance company takes this step, they will not only have to give the policyholder a prior notice but also reasons as to why they are not eligible to renew the policy.

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Reasons for cancellation of a policy

While the three most common reasons for an insurance company to cancel your policy are mentioned above, there are quite a few other instances that might lead to the same outcome. Here are some of them:

• Bad driving record:

If you have a regular history of being in accidents, mainly because of your faults, within a particular period, insuring you might be a risky affair for the insurer.  The company will eventually call for cancellation and send you a notice for the same.

• Deferred registration:

An insurance company will not want to be in business with any driver who has had their vehicle registration revoked, especially for illegal cases such as drunk driving. This is mainly because as per your driving history, you are not a reliable driver and might end up misusing the insurer's money.

• Medical conditions:

Although it might seem ethically incorrect, an insurance company has all the rights to cancel your policy if you are detected with medical conditions like epilepsy or anything that impairs your driving skills. While availing of an insurance policy, you are asked to present your medical reports. Failing to do that or tampering with it might be considered as concealment of information, in which case, your policy will again be cancelled.

• Fraudulent claims:

If you are caught making false accusations or information, even staging an accident just to raise a claim, the insurance policy will, by all means, be cancelled. Such claims often hurt the insurance company's reputation.

Reasons for non-renewal of a policy

There is a varied list of reasons that might lead your insurance company to not let you renew your insurance policy. Some of these reasons might not even be related to you. For example, they might have dropped the policy count locally during the next policy tenure or decided to not offer their services in your locality. Here are some other instances:

• Buying a new car:

This is a rather common scenario. If you have recently purchased a new car, the company might decide to not renew the existing policy anymore. In such a case, you will have to apply for a new one.

• Bad claim history:

The insurer gets to see your previous insurance records before booking your new policy. If they see that in the previous policy period, you have misused and filled several irrelevant claims, they might choose to disallow you from renewing your policy the next time.

• Fines:

Paying too many fines or challans, in turn, means that you are not a good driver. Be it because of driving under the influence, not following the traffic rules and regulations or just over-speeding, this indicates dangerous driving and is not accepted by insurance companies. Once your car gets caught with a high number of tickets, the insurance company starts to consider this as a high-risk situation and stops the renewal of your policy.

• Relocation:

If you are moving to another state where your policy does not fall under the area of the existing insurance coverage, the company might just ask you to buy a new policy instead of renewing it.

With the information mentioned in this article, you are now a lot more informed about not only insurance policies but the difference between cancellation and non-renewal and how it is done.