It is standard for car owners to get confused between an expired and a cancelled car insurance policy. Often, the two terms are used interchangeably, but that is not the case; the two are distinct and have different consequences, including fines, penalties, denied claims, and losing coverage altogether.
In this article, our goal is to clear this confusion between expired and cancelled car insurance policies at once. Therefore, by the time you finish reading, you’ll know the clear distinction between the two, along with their implications and how such a situation can be avoided.
So, without further ado, let’s begin…
Expired car insurance policy - Getting to know the basics
What is an expired car insurance policy?
The term "expired car insurance policy" suggests that the insurance policy has completed its coverage term, reached its end date, and has not been renewed by the policyholder.
Think of it as a prepaid mobile phone connection that expires on its due date, and you need to recharge it to continue enjoying the benefits.
Why does a car insurance policy expire?
Here are a few common reasons for a car insurance policy expiry in the Philippines -
- Policyholder forgets the renewal date
- Miscommunication between the insurer/agent and policyholder
- Lack of funds required for renewal
- The policyholder wants to switch the insurance provider
What are the risks of driving with an expired car insurance policy?
Several risks are associated with a policyholder driving with an expired insurance policy. The list includes -
Penalties/fines from LTO & authorities - In the Philippines, car owners are required by law to have Compulsory Third Party Liability (CTPL) insurance. This is a prerequisite for LTO registration, and an expired CTPL policy may result in potential fines and restrict the renewal of registration.
Zero protection - With no insurance, you, your passenger, and your car are completely unprotected. All the damages and costs associated with medical, hospital, and repair bills fall on your shoulders.
Claims denied - The insurer will not honour your claims if your policy has expired. This puts you in a challenging position, both financially and mentally.
Photo from ShutterstockAlso Read: How to avoid claim rejections: Must-read insurance advice for Filipino drivers
How to renew an expired car insurance policy?
In case your policy has expired, here’s how you can renew it -
- Contact your insurance provider promptly; the sooner you submit the renewal request, the better.
- Make the required payments, and if necessary, make any necessary modifications or alterations to the policy.
- A vehicle inspection may be required if the policy has lapsed for an extended period
Also Read: Top car insurance worries Filipino drivers face - and how to fix them
Cancelled car insurance policy - Getting to know the basics
What is a cancelled car insurance policy?
A cancelled car insurance policy refers to a situation where either the policyholder or the insurer ends the coverage before the policy expires. Meaning, unlike expiry, cancellation is a voluntary termination.
Why does a policyholder cancel a policy?
A policyholder may cancel their policy if they are not satisfied with the provider and wish to switch. The common reasons for this may include unsatisfactory customer service, a complex claims process, high premiums, and other factors.
Photo from FreepikWhy does an insurance provider cancel a policy?
There are a few reasons for an insurer to do so -
- Non-payment of the premium by the policyholder
- Policyholder displaying high-risk driving behaviour like reckless driving, multiple accidents, claims, etc
- Policyholder giving false or incomplete information to the insurer (application or claim form)
Cancellation of policy: Policyholder vs. Insurer
|
Policyholder |
Insurer |
|
Cancellation is initiated due to two reasons -
|
Cancellation is commenced due to -
|
What are the consequences of having a cancelled policy?
A cancelled policy has its own set of implications for both the insurer and the insured. On the one hand, while the insurer loses a client, the policyholder receives no benefit in terms of the No Claim Bonus, faces coverage gaps, which is itself harmful, and is left with limited options for reapplying for insurance.
Also Read: What happens when your policy expires? Renewal tips & reminders
Expired vs. Cancelled policy
Let us now understand how an expired car insurance policy is different from a cancelled policy.
We’ll compare the two on different parameters to simplify things further, starting with the reasons, then moving on to timing, control, and impact.
|
Factor |
Expired Insurance |
Cancelled Policy |
|---|---|---|
|
Cause |
Coverage ended by default on approaching the policy due date. |
Coverage terminated before policy due date, either by the insurer or policyholder. |
|
Impact |
No coverage after the policy expires. |
Coverage offered by the insurer ends immediately. |
|
Timing |
Occurs at the end of a policy's term or due date. |
It could happen anytime. |
|
Control |
Fault of the car owner (failure to renew). |
Decision of either the insurance provider or the policyholder. |
|
Financial Impact |
After expiry, the client is responsible for all expenses related to car damage. |
Leads to high out-of-pocket costs and possibly higher premium charges in the future. |
|
Coverage Gap |
There is a risk of a coverage gap, but it can be avoided with timely renewal. |
A higher risk of a coverage gap, especially if initiated by the insurer. |
|
Legal Implications |
Driving with expired insurance is illegal in the Philippines (considered uninsured). |
Driving with a cancelled policy is also illegal (considered uninsured). |
Also Read: Filing a car insurance claim: Key coverage you’ll need after an accident
Car insurance policy expired or cancelled? Here’s what to do
Post policy expiration, you are suggested to do the following -
- Contact the insurer or agent asap
- Inquire about renewal
- Avoid driving uninsured, especially if the LTO registration renewal is due
Immediate steps after policy cancellation by the insurer -
- Contact the insurer and request an explanation
- Try to negotiate reinstatement with the provider
- Look for another provider asap, as driving uninsured is illegal
Tips to avoid policy expiration and/or cancellation
- Set a reminder on your phone for policy renewal
- Don’t skip messages or calls from your insurer or agent, as they may be contacting you to share important information
- Always be truthful on your insurance application and claim form. Don’t hide any fact
- Drive safely
Also Read: How to check your car insurance expiry date online and offline
How to manage an insurance policy
Here are a few essential tips to manage your car insurance policy in the Philippines -
- Maintain a good driving record, as insurance providers not only prefer but reward safe drivers with low premiums
- Setting calendar alerts for policy renewal is a must
- Make sure to compare at least three to four insurance providers before settling for the first offer
- Avoid selecting a policy just because it’s the cheapest one available; instead, opt for a policy that offers optimal coverage within your budget
Bottom line
If you are a car owner, then you must have a clear understanding of the difference between a car insurance policy expiry and cancellation. In both cases, being left uninsured is against the law. However, cancellation has severe long-term consequences, including difficulty in finding a new provider and a hike in premiums. It is therefore recommended to avoid both policy cancellation and expiry. This can be achieved through several key practices, including timely renewal, maintaining good driving habits, and maintaining open communication with the insurer.
Also Read: Top 10 must-have car insurance add-ons for Filipino drivers
FAQs
Q1. How can I prevent my car insurance policy from being cancelled?
Ans. You can avoid car insurance policy cancellation by paying premiums on time, maintaining safe driving habits, and maintaining open communication with the provider.
Q2. Will my insurance policy get cancelled if I miss a premium payment?
Ans. Not necessarily, as some providers offer grace periods to policyholders to make the required payment before the policy is cancelled.
Q3. My insurer cancelled my policy unfairly. What should I do?
Ans. Ask your insurer for a written explanation. If that doesn’t work, file a complaint with the Insurance Commission (IC).
Q4. Can I renew my insurance policy online?
Ans. Yes, several insurance providers in the Philippines offer online renewal services.
Q5. What documents are required for policy renewal post expiry?
Ans. Typically, the following documents are required: OR/CR, driver’s license, valid ID, and vehicle inspection report (if the policy lapse extends beyond a certain point).
Q6. Will a cancelled insurance policy affect a policyholder’s future applications?
Ans. Indeed, as we move forward, such policyholders might be viewed as high-risk clients. Thus leading to high premiums.
Q7. What are the consequences of carrying an expired insurance policy?
Ans. An expired insurance policy leads to a risk of fines, financial liability, and an inability to renew LTO registration.
Q8. Can I cancel my insurance policy at any time, at will?
Ans. Yes, a car insurance policyholder in the Philippines can cancel their policy mid-term or at the time of policy renewal.
Q9. Will I get a refund if my policy gets cancelled early?
Ans. Refund in case of early cancellation depends on the insurer and policy terms & cancellation conditions.
Q10. Why would a provider cancel a policy?
Ans. A provider can cancel a policy for non-payment of premium, repeated risky driving, or fraud.
Q11. Is CTPL insurance enough for Filipino drivers?
Ans. CTPL insurance is a mandatory requirement by law in the Philippines. It offers limited coverage; therefore, comprehensive coverage is highly recommended.
Q12. What happens after the expiry of a car insurance policy?
Ans. In such a situation, the policyholder loses coverage, is unable to renew registration, and faces financial liability arising from car accidents & damages.
Q13. Can I drive with an expired car insurance policy?
Ans. Technically, you can not drive at all with an expired license, as it is considered illegal.
Q14. Can I renew my expired insurance policy?
Ans. Yes, however, you need first to contact your provider and be prepared for a potential vehicle inspection demand.
Q15. What is the difference between an expired and a cancelled insurance policy?
Ans. An expired insurance policy means coverage ends upon approaching the due date, whereas policy cancellation refers to the insurance being ended early, either voluntarily by the insurer or the policyholder.
