Lapsed Motor Insurance Policy

Suppose, after a long hectic week, you decide to go out on a road-trip. You choose to take the ‘road less travelled by’ to get away from the buzzing city noise and population. Suddenly, your car breaks down in the middle of the road. However, you don’t worry because you know you’ve got a roadside assistance add-on in your motor insurance policy. You know that though you are stranded in this deserted area, a technician shall come soon and rescue your car.

So you try to avail it - but the insurance company tells you that your policy has lapsed. This is when it strikes you that you have forgotten to renew your policy. All its benefits have been terminated. You realise that in the absence of an active motor insurance policy, the expenses for the repair of the car are now to be fully borne by you. And, since a car insurance policy is a mandatory requirement, you might face legal repercussions too.

This is the kind of financial and emotional stress we hope you never have to suffer.

In this article, let’s learn about insurance lapse, and what you can do to get out of that difficult situation.
 

What does a Lapse in Motor Insurance Policy Mean?

A Motor Insurance policy is essentially a one-year agreement between the insurer and you. You are required to renew the policy on a yearly basis, as per the date mentioned on your policy document. If you fail to do so, the insurance company will give you a grace period of 90 days to renew the policy. This is so that you don’t lose your No Claim Bonus discount.

An insurance lapse occurs when you fail to renew the policy by paying the premium amount, before the due date or even after the 90-days grace period.

After a lapse, all the benefits of your policy are terminated. In such a situation, if your car gets involved in an accident or gets damaged, you will have to bear the entire repair/replacement costs from your own pocket.
 

Consequences Of A Lapsed Policy

So, what happens if you don’t pay the renewal premium on time and your policy lapses?

• Not Eligible To Claim

  You will not be able to raise a claim in case of an accident. All the repair costs will have to be paid out of your own pocket.

• Loss Of No Claim Bonus

  The No Claim Bonus is a discount that the insurer gives you on your premium after a claim-free year. If you do not renew the policy within the grace period (90 Days), then you also lose the No Claim Bonus. Hence, you may end up paying a higher premium than that of last year.

• Repeat Inspection Of Car While Purchasing A New Policy

  Once the policy lapse, you will have to get your vehicle inspected first, to get a new policy. Depending on the condition of the vehicle, it will be at the discretion of the insurance company to insure your vehicle or not.

• Legal Issues

  If during the lapsed policy period, you are caught driving an uninsured car, you would have to face legal repercussions. If driving your vehicle without a valid insurance policy, you will be charged ₹2,000/- for the first time and ₹4,000/- for the second time or imprisonment for up to 3 months.
   

What Should You Do If Your Policy Lapses?

These are the steps you should follow after your policy has lapsed -

• Contact your existing insurance company or compare and choose another one as per your choice for renewing your policy.
• Be prepared with the documents for the purchase of the new policy.
• The insurance company in all probability will request for inspection of your vehicle before approving the renewal. The inspection can be scheduled as per the date, place, and time decided between you and the insurer.
• The insurer will send their inspection officers to your place on the decided date and time. They will examine the condition of the vehicle. This is to check if there is any major damage to the vehicle which cannot be covered.
• If the vehicle looks fine to the inspection officers, they will generate a report that will approve or decline insurance for your vehicle.
• If the inspection report has approved your renewal, the insurance company will send you the payment link for making the payment.
• Once the payment is done, the insurer will send you the policy documents.
• Note, during the inspection if there are any major damages found on your vehicles, like a dent on the hood or a small crack on the windshield, the insurance company may not provide you any coverage for those damages for a future claims. Or they will refuse to provide you with insurance and ask you to get the vehicle repaired and after that purchase policy
• You can raise an inspection request with the insurance company once you have repaired the vehicle.
• Make sure you do not drive the uninsured vehicle, to avoid legal consequences.
   

Steps to Avoid A Future Insurance Lapse

Once you have already suffered the aftermath of a policy lapse, you should try to do everything to prevent such a situation from happening again.

Here’s what you can do to avoid these hassles -

• Always make payments before the due date or within the grace period. You will have to go through the entire purchase process again, including inspection and documentation. If anything seems amiss, your application may even be rejected by the insurance company.
• Opt for an Auto-Debit/ECS option having an automatic payment system, so you don’t have to actively remember the date of renewal and can avoid lapse.
• Always keep a check on any emails, messages, and notifications from the insurer. Most insurers send renewal reminder mails and SMS a month prior to the expiry date of the policy.

As important as it is to buy a good motor insurance policy for your car, it is equally important to timely renew it. You don’t want to risk having to pay for heavy expenses from your own pocket, if your car meets with even a minor accident. Or drive an uninsured car on public roads only to face legal ramifications. The way you mark the important events of your life on the calendar, make sure to set reminders to renew your policy, too. As it is said, better safe than sorry!