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What to do if your Motor Insurance Policy gets lapsed?
[Posted by: InsuringIndia Blog on 21-Jan-2016]

Lapse in motor insurance policy

 The validity of your vehicle’s insurance is up to a certain period only. The period depends on the date on which the policy was purchased and needs to be renewed before the policy expires. If you miss the deadline of renewing your vehicle insurance policy, it lapses. A lapsed motor insurance policy is fraught with risks and penalties and should be avoided. It is a legal offence to drive an uninsured vehicle and it also exposes you to the risk of financial liabilities in case the vehicle is involved in an accident anytime during the uninsured period. Therefore the lapsed insurance can put you into a lot of unnecessary trouble. You will have to deal with the fine and penalties as they come. So what’s the way out? The prompt Renewal of your car insurance policy is the only way out.         


Implications of a lapsed motor insurance policy

·         If your motor insurance policy has lapsed then you will have to buy a new motor insurance policy by filling in your details again and also get your vehicle inspected by the company surveyor for a re-assessment. There are several insurance companies present in the market these days, so depending on your vehicle’s age and make you should find one that gives you a good premium at competitive rates. More convenient would be to get an online motor insurance done after you compare online quotes from different companies. Online motor insurance is faster and more efficient than the conventional insurance method and can be done from the convenience and comfort of your home. It can be done within a single day and you can ride your insured vehicle without any fear in a very short span of time. In comparison the conventional motor insurance policy might take 5-10 days and you will be stuck without a vehicle for all those days. Another advantage of taking online auto insurance policies is that they send you timely reminders for the renewal of the policy so that it doesn’t get lapsed. They also give age based and occupation based discounts to their clients.

·         If you  renew your lapsed policy within 90 days then you are eligible for the benefit of No Claim Bonus (NCB) which is the discount offered by the insurance company for not making any claims in the coverage period. It gradually reduces your motor insurance premium. Even if you wish to change your insurance provider at the time of renewing your policy you can still enjoy your NCB discount by getting it transferred at the same rate you are entitled to from your previous insurance provider when you claim renewal plans. You only need to provide a No- Claim Bonus certificate from your previous insurer to your new insurer.

·         The No Claim Bonus (NCB) cannot be availed if the previous insurance policy has lapsed 90 days ago. This can lead to higher premiums.

Buying a new motor vehicle insurance policy

Whether it is your private car insurance, your bike insurance or commercial vehicle insurance, the motor insurance policy secures all of them. It covers all types of vehicles plying on public roads. Having a motor insurance policy is mandatory as per the Motor Vehicles Act, 1988 for all vehicle owners. Any vehicle owner whose vehicle is registered in his/her name with the regional transport authority in India necessarily has to take a motor insurance policy. It gives financial support on demise or death sustained by the vehicle owner because of an accident while travelling or using the vehicle. It also covers the treatment of the physical injury sustained by the driver and passengers while travelling in the vehicle and the damage to  property. It saves you from any financial loss caused due to accidents, damage or theft of your vehicle.



There are two options available for buying a motor insurance policy-

·         Third party insurance- It is the most basic policy that is required by the law and it covers the liability that a person would have to bear in the event that he/she damages someone else’s property or injures or causes death of another person with his/her vehicle.

·         Comprehensive insurance (Third party+ own damage)- A comprehensive insurance policy is the most popular policy as it covers damage, injury or death to third party as well as covers driver or passenger death/injury and loss or damage to the insured vehicle and its accessories due to various reasons such as fire, explosion, lightening, burglary, housebreaking, theft, flood, typhoon, storm , hurricane, cyclone, hailstorm, riot, strike, damage while in transit, landslide, earthquake, malicious act, terrorist act etc.

It doesn’t cover things like wear and tear, mechanical or electrical breakdowns, loss due to war, depreciation or any consequential loss, loss when driving without/invalid license or under the influence of alcohol, loss when the vehicle is being used not in accordance with “limitations as to use” such as a private car being used as a taxi or being used as a racing car in sports events etc.

Insured’s Declared Value(IDV)- The premium amount of your motor insurance is decided on the basis of the Insured Declared Value or IDV which is calculated on the basis of the vehicle manufacturer’s listed selling price of the vehicle after deducting depreciation for each year as per the schedule of the Indian Motor Tariff. The premium rises if the IDV  increases and reduces if the IDV is lowered.

Generally the premium is decided on the basis of the following factors-

·         The age of the vehicle

·         The type of vehicle

·         Sum Insured/ Insured’s Declared Value(IDV)

·         Place of registration

·         Fuel type ( petrol, diesel, CNG or LPG)

A lapse in your auto insurance policy puts you in a bad light and the insurance companies base their premiums on how they rate your perceived responsibility and risk. They could subject you to higher rates as an irresponsible driver. One of the biggest reasons for not allowing your motor insurance policy to lapse is the big premiums which follow as a result. So be alert and responsible and renew your insurance policy on time, avoiding any embarrassment and inconvenience to yourself.


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*This is based on the difference between the highest and lowest premium's for a single person, age 25, looking for an individual health policy with the sum insured of Rs. 5 lakhs.
**This is based on the difference between the highest and lowest premium's for a single person, age 25, looking for a term plan, with the sum insured of Rs. 30 lakhs, and the premium paying term of 30 years.
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