What is a Lapse in Car Insurance Policy?
Car insurance is an annual contract that needs to be renewed by its due date (and time) as mentioned in the policy document. An insurance lapse occurs when one fails to renew the policy by the due date.
After the car insurance renewal date expires, any type of car insurance claim made isn’t entertained by the insurance company as the insured does not hold a valid insurance policy. Moreover, after an insurance lapse, in case of an accident, one has to bear the entire cost from his/her own pocket.
The Consequences of Lapse
- Renewal can be rejected in the insurance lapse period is significantly high.
- Renewal may be allowed but with some fines & penalties.
- One may have to apply again for a fresh policy.
- Fresh policy is possible only after car survey or inspection.
- Company may charge a higher premium on a fresh policy.
- Possible loss of annual NCB (no-claim bonus).
- Legal hassles of driving an unsecured car without a valid policy.
- Mental harassment, responsibility and possible loss of money, in case of any accident, during the lapse period.
What to do When Your Car Insurance Policy Lapses?
As a first step, quickly check if there is any grace period for car insurance renewal. Sometimes, insurance companies offer a grace period to pay the premium and renew your policy after the due date. Please check this from your agent or insurance company without any further delays. This grace period can range between 3 days and 30 days with or without any late fees, charges, or penalties.
After Grace Period is Over, Immediately Renew the Lapsed Car Insurance Policy
In case of an insurance lapse, without any further delay, one should immediately get in touch with the insurance company and check on all the available options for car insurance renewal. Some companies might allow you to renew the policy, in case the insurance lapse is only of a few days, or else the insurer will advise you to apply again for a fresh policy.
While applying for a fresh policy after an insurance lapse, one should scan and shortlist insurance companies based on the most competent premium being offered. Simultaneously, one should arrange all the previous policy documents, details of any past claims, and basic car documents such as registration certificates, pollution certificates, etc., and keep them handy.
The insurance company must be contacted to arrange a survey or inspection of your car as soon as possible. This survey is required to determine any pre-existing damages, which usually insurers may not cover or charge an extra premium to include this depending on the extent of the damage.
Based on all these factors, an insurer can review and decide whether you are still entitled to a ‘No-claim Bonus (NCB)’ or not on your fresh policy. Once the survey is done, the premium offered by the company may be valid only for a limited time (typically 24 hours) and one should make a final decision within this time period.
How to Avoid Future Lapses?
Renewing your car insurance is quite simple these days and can be done easily online directly on the insurance company’s website or on policy aggregators like Policybazaar.
Typically insurance companies chase and send reminders for policy renewal to customers through automated calls, emails, and SMS alerts. Online car insurance renewal is also advisable as you can get a digitally signed policy immediately.
Ideally, one should set reminders on mobile phones or calendars rather than depending on the insurance companies to send renewal alerts. Expert service portals also come in handy in such scenarios.