What is the grace period in car insurance, and why is it important?

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According to the Motor Vehicles Act, holding at least a third-party car insurance policy in India is crucial. Such a plan keeps one protected against liabilities arising due to damages caused to a third-party vehicle, person or property. Likewise, individuals can also choose a comprehensive car insurance plan to cover both third-party as well as own car damages.

Regardless of the type of insurance plan one chooses, it is important to know all technical terms associated with motor insurance. One such term is grace period, read through to know more about grace period in car insurance plans and its importance. Knowing these details will help individuals compare, buy, or renew car insurance online.

What is the grace period in car insurance policies?

The grace period in a car insurance policy refers to the insurance provider’s amount of time for policy renewal. In this time frame, one will continue to get benefits, like NCB or No-claim bonus that they have received by not raising any claims. That said, the car will remain uninsured during the grace period. As a result, the policyholder will not be eligible to raise any claim in this period.

Usually, all car insurance policies have a certain period of validity, after which it needs to be renewed so that the coverage remains legally valid. According to the IRDAI, car owners must renew insurance policies before the expiry date. So, most insurers offer a grace period of up to 90 days to make it more convenient if policyholders miss out on the expiry date.

Why do car insurance providers offer a grace period?

Suppose one is unable to renew the car insurance policy before the expiry date. It can end the policy contract with the insurance company, raise the necessity of a re-inspection for policy renewal, and the loss of NCB benefits. Therefore, to help policyholders cope with such situations, insurance companies provide a grace period after the policy’s expiry date. 

Consequences of not renewing car insurance online within the grace period

Elaborated below are some of the disadvantages of not a renewing car insurance plan, be it third-party insurance or comprehensive, within the grace period.

Loss of coverage

Without valid policy coverage, one will not be able to raise any claim. Therefore, in case of serious damages to your car, the insurance provider is not liable to compensate.

Possibility of legal issues

Upon driving an uninsured car, one can get charged with fines. Plus, a repeat offense can lead to harsher fines along with imprisonment.

Losing the benefits of No-claim Bonus

If the motor insurance policy is not renewed within 90 days from the expiry date or within the grace period, one risks losing all NCB benefits earned due to not raising claims during the policy term.

Scope for a re-inspection

Suppose one fails to renew the car insurance policy within the grace period. In that case, it might call for a re-inspection of the vehicle for the insurer to consider the policy for renewal.

No coverage in case of third-party damages

Without a valid insurance policy due to missing policy renewal during the grace period, one will have to bear all expenses in case of third-party damages.

Benefits of car insurance policy renewal within the grace period

Highlighted below are three of the most important benefits of renewing car insurance online within the grace period.

  • If one successfully renews the car insurance plan during the grace period, they will not lose the NCB benefits.
  • Also, by renewing the motor insurance plan within the grace period, one can avoid paying a higher premium.
  • Most importantly, the policy remains active during the grace period. However, there will not be any coverage against own-car or third-party damages. That said, policyholders continue to enjoy NCB benefits for 90 days from the policy’s expiry date.

Therefore, it is clear that renewing car insurance online or offline is crucial to keep the coverage valid. One must always try to renew the policy on time. However, if you miss, the grace period provided by the insurer should be taken seriously, and one should renew the policy within this period. To understand the renewal process in detail, policyholders can contact their respective insurers and get the renewal done at the earliest. Hopefully, the above pointers will help one understand the meaning and associated benefits of a grace period in a car insurance policy. In addition, one should also be aware of the other technical terms which are part of motor insurance policies to make informed decisions every time.