People skip paying car insurance premiums for many reasons. Some ignore it because they don’t drive as much, while others skip due to budget constraints. There are also some who skip it because they feel it’s not something they need, as they rarely get into accidents.
Whatever the case, skipping premium payments causes many problems for policyholders because a car policy is part and parcel of owning a car. If you are considering skipping your insurance renewal, read this before you make the call.
Road tax cannot be renewed
If you own a car, you’d probably know that a car’s road tax and insurance are tied together. They are designed to work hand in hand, so one cannot operate a vehicle without the absence of the latter. Since motor insurance is compulsory for all vehicles in Malaysia, you cannot renew your road tax if you don’t pay for your insurance.
If caught driving without a valid road tax, you can be fined up to RM3,000 under Section 14(4) of the Road Transport Act (RTA) 1987. So, never take insurance renewals lightly if you plan to continue driving in Malaysia. Luckily, both documents expire simultaneously, providing further incentive for concurrent renewals.
Policy cancellation
Another possible consequence of not paying for your car insurance premium is your policy being cancelled by the insurer. Vehicle insurance acts as a shield. It protects owners against the financial burden of repairing a damaged car. Without it, they are not protected against accidents, theft, loss and damages caused by convulsions of nature.
Damages from these incidents typically cost a fortune, which can be too much out-of-pocket expenses for most people. But with insurance, you don’t have to worry about paying a hefty sum for unexpected vehicle repairs.
Insurance lapse
Not paying or making late payments can also cause your policy to lapse. A lapse in coverage means that the policyholder and their vehicle are not covered for a given period of time. Insurance policies typically expire after a grace period (usually 30 days), within which you must settle your outstanding payment to resume the coverage.
Failure to settle the payment within the grace period can lead to policy lapse, which can subsequently lead to cancellation. Though lapses are pretty common due to reasons such as owners forgetting to renew their insurance or financial constraints, you should never let it pass the grace period to remain covered.
Paying higher premiums
A lot of people skip insurance renewals to save up on cash. But this mistake can, in return, cost you more when you choose to renew your car policy again. For example, some insurers may charge you a penalty to activate a lapsed policy, which could affect the final amount you must pay.
At the same time, skipping renewals can potentially affect your No-Claim Discount (NCD) rate. Remember that every NCD is only valid for one year. Failing to renew your insurance on time (for over a year) will gradually decrease your NCD. For example, if your current year NCD is 55%, a year of not renewing your insurance will decrease it to 45%.
Impacts on credit score
Though it seems unlikely, skipping car insurance payments can negatively impact your credit score. This is because pending insurance premiums are also recorded among the information collected in the Central Credit Reference Information System (CCRIS).
If you have been found to skip insurance renewals, your credit score may deteriorate as it reflects your creditworthiness and likelihood of making payments on time. So, don’t take a chance and risk your credit score by skipping insurance renewals. This can have a lasting impact on your future financing requests.
What’s the verdict?
As you can see, skipping insurance renewal is not encouraged because it can result in serious ramifications that hinder your ability to use your vehicle. So, to make things easier, we recommend performing renewals as usual.
If you ever feel your car premium to be too expensive, consider using online platforms like Bjak, where you can find affordable plans with savings of up to RM500. You can even pay for your coverage in instalments with our Buy Now, Pay Later options. Check out Bjak.my to learn more.
Bjak is one of Malaysia’s biggest insurance comparison websites, offering policies from over 10 brands. Get your free insurance quote from Bjak today!
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