In car insurance, the grace period is an important aspect as it allows you to renew your car insurance policy after the expiry date without extra costs or losing the benefits of your existing policy. When you opt for a third-party, comprehensive, or own-damage car insurance policy, the insurer charges a premium for a fixed tenure. This means that the policy expires at the end of the specified tenure. To keep it active, you are expected to renew it on or before the expiry date. If you miss the car insurance renewal online date, then the grace period offered by most insurers allows you to renew the policy without losing any benefits.
Understanding Car Insurance Expiry And Renewal
Every car insurance policy has a fixed term. This is usually between one and three years. The term is the period for which the policy is in force. Hence, it offers coverage for damages during the said period. As a policyholder, you need to renew the policy on or before the last date of the term. Failure to do so can result in the expiry of the policy. This means that the contract between you and the insurance provider becomes null and void. Hence, your car is not insured. This can expose you to the following consequences:
- Legal consequences, including a fine and possible imprisonment
- No coverage for damages
- No third-party liability cover
- Loss of the accumulated No Claim Bonus
- Re-inspection of the car for buying a new policy
What is a Grace Period in Car Insurance?
Let’s say that your car insurance renewal date is June 30, 2022. However, you need to go on an urgent business trip and forget to renew your policy on time. On July 01, 2022, your policy lapses. This means that if you drive your car, then it would be illegal. Also, if your car gets into an accident or mishap on July 01, 2022, then you cannot file a claim with the insurer.
Most insurance providers allow policyholders to renew their policies within 15-30 days after the expiry of the policy. This is known as the grace period. It allows you to retain all the benefits you might have accumulated on your policy. However, the coverage will resume only after the policy is renewed.
Benefits of a Grace Period in Car Insurance
Here are the benefits of grace period in four-wheeler insurance:
- Lower premium costs: Usually, insurance companies offer discounts to existing policyholders based on various parameters. However, if the policy lapses, then you risk losing these discounts. The grace period allows you to renew your policy without losing out on lower premium costs.
- No Claim Bonus: Most insurers offer discounts on the car insurance premium on renewal to policyholders that have not raised a single claim during a policy term. This is a progressive discount that increases with every subsequent year that you do not file a claim and can go up to 50% of the premium amount. However, if the policy lapses, then you risk losing the accumulated discount as you will have to buy a new car insurance policy online. With the grace period, you have an opportunity to keep your No Claim Bonus benefit.
- Vehicle inspection: When you renew your existing car insurance policy online, most insurers do not inspect the car. They might ask you to upload pictures of your vehicle and renew the policy online in no time. However, if your policy lapses, then you might have to get the car re-inspected, which can take time. The grace period allows you to renew your existing car insurance policy online without having to get it re-inspected.
If you have missed the expiry date of your policy, then call your insurer and ask about the grace period. Also, make sure that you renew the policy within the grace period.
In India, the Motor Vehicles Act of 1988 has made it mandatory for all car owners to have an active car insurance policy. If your policy lapses, then it is illegal to drive your car in the country. The grace period allows you to renew it without having to go through the hassle of buying a new car insurance policy online and getting your car re-inspected. It also allows you to retain your No Claim Bonus and other benefits offered by your existing insurer. Hence, make sure that you undertake car insurance renewal online within time and know the grace period offered by the insurer.