Everything comes with an expiry date and so does your motor insurance policy. You need to renew the policy regularly to enjoy non-stop coverage under it. The duration of motor insurance policies depend on the type of policy you are buying. Two-wheeler insurance plans are available for 1, 2 or 3 continuous years. If you buy a 3-year policy, you get continuous coverage for 3 years without having to renew your policy every year. However, in case of car insurance policies, long-term durations are not available. The policy comes with a term of 1 year and after every year you have to renew the policy and pay the renewal premium. However, whether the policy comes for one year or three years, it is often seen that policyholders do not renew their policies on time. As a result, the policy lapses. This lapse is often ignored which is, actually, a very dangerous thing. Do you know why? Here’s why –
- Policy lapse = no coverage
Coverage under a motor insurance policy is valid only till the policy’s due date. If the policy is renewed within the due date, the coverage continues for another period. If, however, the policy is not renewed within the due date, it lapses. A lapsed policy does not allow the coverage to continue. So, if your policy has lapsed, its coverage has stopped. If you face any claim in such a state, the claim would be rejected. You would have to bear the financial costs incurred in such claims. Do you know how high the financial costs can go? If any individual has died in the accident, the claim might come in lakhs. Even your own vehicle’s repair costs might run into thousands. Are you equipped to deal with such high financial costs yourself? If your policy has lapsed, you would have to.
- Policy lapse = legal complications
Do you know that the Motor Vehicles Act, 1988 mandates a ‘valid’ motor insurance policy? Valid means that the policy should be in force and active. If it lapses, the policy is called an invalid or an inactive policy. If you are caught by the traffic authorities with a lapsed policy, you face legal consequences. You would have to pay a fine and, in severe cases, the lapsed policy might also result in imprisonment.
- Policy lapse = loss of no claim discount
In your motor insurance policy, when you do not make a claim in a policy year, you become eligible for a no claim discount. This discount starts at 20% and increases every subsequent year when a claim is not made. The discount goes as high as 50% for five claim-free years. This discount is allowed in the renewal premium where you can enjoy lower premium rates. However, the discount is available only if the policy is renewed within a specified time. If the policy lapses and is not renewed within 90 days, you lose the accumulated no claim discount. So, a lapse also causes you to lose your discount.
- Policy lapse = inspection hassles
You can renew a lapsed policy but such renewals have some hassles. The insurance company insists on your vehicle being inspected before the coverage is allowed to renew. The surveyor inspects the vehicle, submits his report and only after the report is found satisfactory to the insurance company is renewal allowed. So, lapse of the motor insurance policy results in unnecessary hassles upon subsequent renewals.
- Policy lapse = increased renewal premium
Believe it or not but when you renew your policy after it has been lapsed, the insurance company charges a higher renewal premium. The premium is higher compared to the premium which would have been charged if the policy would have been renewed on time. Thus, you have to part with higher premiums when renewing a lapsed policy.
Because of these reasons, a lapsed policy is a dangerous thing. You should make sure to renew your policy on time. You can enjoy continued coverage, face no legal offence, avail no claim discounts, avoid inspection hassles and pay the right amount of premium. So, check your motor insurance policy’s due date and don’t forget to renew the policy on time.