Categorized | Car insurance

Cancellation of policy

Cancellation of policy

taken from moneySENSE

Mr Muthu Krishnasamy bought a motor insurance policy for his three-year old car from an insurance company. Before his policy was due for renewal, Mr Krishnasamy received a written notice from the insurance company that his policy would be cancelled. No explanation for the cancellation was provided. Mr Krishnasamy had made two consecutive insurance claims in the last six months amounting to $21,000 and $38,000. He felt that it was unfair for the insurance company to cancel his policy due to these claims. The insurance company explained to Mr Krishnasamy that one of the conditions in his insurance contract gave the company the right to cancel the policy by giving the policyholder written notice of seven days.

MoneySENSE tips for consumers

* Both you and your insurance company have the right to cancel the motor insurance policy for any reason by giving written notice of seven days to the other party. Insurance companies can decide not to renew a policy after a major accident claim. These are business decisions of the insurance company.
* If your insurance company cancels the policy, it will refund you the unused proportion of the premium. Some insurance companies refund the premium on a pro-rata basis with the deduction of a small administration fee. Others use a method that calculates what would have been charged if your policy were a short-term policy. This usually applies if the cancellation is at your request. You should check with your insurance company how it calculates policy refunds.
* Note that refunds may be subject to a minimum amount, and that your insurance company may reserve the right not to refund any premium if a successful claim has been made on the policy.
* Make sure you check carefully and understand what the policy covers before you buy the policy.

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