Why You Must Renew Insurance Policies Before Last Date

General insurance contracts are generally yearly in nature and should be renewed before the policy's expiration date. Individuals often purchase health insurance, personal accident insurance, auto insurance, and maybe householder's package insurance, among other things.

Life insurance plans, on the other hand, are long-term contracts that require timely payment of instalments.

Supriya Rathi, Wholetime Director, Anand Rathi Insurance Brokers, explains, “An insurance policy covers fortuity, and one really can’t predict when one would require the insurance to perform or make good on its promise to pay.”

“An aggressive dash against one’s vehicle, a nasty fall, a sudden heart attack, a sneaky theft incident, or a freaky electrical short circuit causing a fire – any of such events can cause a loss – physical and/or financial," she continues.

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As a result, it is important not only to make the decision to get insurance but also to continue renewing it regularly without interruption.

Specific coverages and benefits for some insurances, such as Mediclaim and Motor, are lost if the policy is not renewed on time.

Risk Coverage:

Risk coverage is the most important factor for timely renewal. There are several cases of people who have forgotten to renew their insurance and now find themselves in a claim position where, while having had insurance until recently, they are suddenly uninsured as of the date of the occurrence because they neglected to renew.

“Not only is the importance of Date, but even Time. E.g., if you miss your vehicle insurance, you may have to go through a process of inspection of the vehicle, and from the time of the inspection of the vehicle, cover may be granted when the money is received,” adds Rathi.

It's worth noting that if there's an accident between the inspection and the payment, the insurance company isn't liable.

Coverage Continuity:

Individuals need continuity in health insurance because most retail policies have waiting periods ranging from one to four years for particular diseases and pre-existing conditions.

“A break in insurance can certainly create problems here despite the grace period and the insured would have to go through the waiting periods all over again,” Rathi adds.

Furthermore, if a senior citizen's policy is not renewed, the odds of being able to receive the same insurance plan after a gap are slim, as most plans have an entrance age requirement.

Legal Requirement:

In the case of vehicle insurance, the owner must at the very least have Third-Party Legal Liability coverage. The obligatory Third Party Legal Liability coverage is included in all motor insurance policies. Even first-time offenders who operate a vehicle (of any sort) without this obligatory insurance face a fine of Rs 2,000 and/or imprisonment of up to 3 months. As a result, an uninsured automobile may burn a hole in a person's wallet.

Benefit of No-Claim/Cumulative Bonus:

Similarly, some insurers provide a 'cumulative bonus' in their policies, which boosts the total covered by 5% to 50% when the policy is renewed. This benefit would be lost if you have break-in insurance.

This Bonus is also granted as a direct decrease in the Renewal Premium by some insurance carriers. If the renewal is not completed on time, the insured may forfeit the Bonus Benefit.

Comprehensive Motor Policies also include a 'No-Claim Bonus,' which entitles an insured to a significant premium discount at renewal time.

Moreover, Rathi says, “as this No Claims Bonus, follows the fortune of the Insured, and is deemed as a reward for a good track record, it can be availed by an insured person for a new vehicle ( which carries a high IEV); and avail substantial savings in OD premium. Insurance breaks can lead to loss of NCB.”

Keeping Administrative Costs Low:

Expired policies or renewals with gaps might cause procedural and administrative issues for other policies. Aside from that, there may be an additional cost; for example, automobiles with an insurance gap are usually subjected to an examination before renewal.

This Inspection Rathi adds, “is an additional cost over and above the premium which many a time the insured has to bear to restart their motor insurance. In some cases of medical insurance policy, the insured may have to go for some medical test and that involves both time, effort and cost.”

“Thus, one can realize that a break in insurance increases the pain points for the insured in multiple ways. And this is avoidable. It is more about the mindset and the importance one attaches to insurance,” Rathi explains. With a little additional caution, the insurance policy will continue to provide the customer with peace of mind.

It is recommended that you pay the advance payment as soon as you receive renewal notification from the Insurance Company (after making any necessary modifications to the policy) and be safe.