How to Cancel Car Insurance – Process, Penalties and Refund

There are several reasons why you may want to cancel your car insurance.

You may have sold your car, changed insurers, or no longer need the policy. Whatever the reason, cancelling a motor insurance policy involves more than simply stopping your payment.

You may need to submit documents, return certain policy documents and check whether you are entitled to a refund. Your NCD may also need to be handled if you are transferring it to another car.

This guide explains what you should know before cancelling your car insurance in Malaysia.

How to Cancel Car Insurance

The exact process depends on your insurer, but the usual steps are:

1. Contact your insurer

Tell your insurance company or takaful operator that you want to cancel your policy.

The insurer will explain the cancellation procedure and tell you which documents are required.

If you bought the policy through a platform such as Bjak, you can also check the cancellation or refund procedure with the platform.

2. Submit the required documents

Depending on the reason for cancellation, you may be asked for documents such as:

• Signed cancellation request
• Copy of your MyKad or other identification document
• Policy or certificate details
• Vehicle registration details
• Proof of sale or ownership transfer, if applicable
• Other documents requested by the insurer

If you have sold the vehicle, tell the insurer that the vehicle has changed ownership.

3. Check whether the original insurance certificate is required

Some insurers may require the original Certificate of Insurance or other documents before processing the cancellation.

This depends on the insurer and the type of policy.

For digital policies, the insurer may provide a different process.

4. Wait for the insurer to process the cancellation

Processing time depends on the insurer and whether all required documents have been submitted.

Do not assume that the policy has been cancelled simply because you have submitted a request.

Wait for confirmation from your insurer.

5. Check your refund

If your policy qualifies for a refund, the insurer will calculate the amount based on the policy’s cancellation terms.

The refund may not be equal to the unused portion of your annual premium.

Why Is My Refund Less Than Expected?

Motor insurance refunds are subject to the terms of the policy.

Depending on the insurer and circumstances, the refund may be calculated using a short-period rate rather than a simple pro-rata calculation.

For example, cancelling a policy halfway through the policy period does not necessarily mean you will receive 50% of the premium back.

The insurer may deduct the amount applicable to the period during which the policy was in force.

Some policies may also have specific conditions relating to claims, cancellation fees or other deductions.

Therefore, check your policy wording or ask your insurer for the exact refund calculation before cancelling.

Can I Cancel My Car Insurance After Making a Claim?

This depends on the policy terms and circumstances.

If a claim has already been made or incurred, you may not be entitled to the same refund as a policy that has had no claims.

The insurer will determine the cancellation and refund based on the applicable policy terms.

Always check with your insurer before submitting a cancellation request.

What Happens to Your NCD When You Cancel?

Cancelling your car insurance does not automatically mean your accumulated NCD disappears immediately.

For private cars, the NCD scale currently reaches a maximum of 55% after five or more claim-free years.

Claim-Free Period	NCD
1 year	25%
2 years	30%
3 years	38.33%
4 years	45%
5 years and above	55%

If you are selling your old car and buying another one, you may be able to transfer your NCD to the new vehicle, subject to the applicable terms and conditions.

Before cancelling the old policy, tell your insurer that you want to preserve or transfer your NCD.

You can also check your NCD before buying your new insurance.

What Happens to Your Roadtax After Cancelling Insurance?

For private vehicles, the LKM (road tax) is linked to having valid motor insurance.

However, the old wording about a physical road tax disc is no longer appropriate for most private vehicles.

Since 10 February 2023, JPJ has implemented digital LKM for individual private vehicles. The LKM can be displayed digitally through MyJPJ or accessed through the JPJ Public Portal. A physical disc no longer needs to be displayed for vehicles covered by the digital LKM system.

If you cancel your insurance, you should not continue driving the vehicle without ensuring that the required insurance and LKM remain valid.

If you have sold the car, complete the relevant ownership and insurance arrangements instead of continuing to use the vehicle under the old owner’s policy.

What Are the Penalties for Driving Without Insurance?

Driving a motor vehicle without the required third-party insurance is an offence under Section 90 of the Road Transport Act 1987.

Upon conviction, the offence can carry:

• A fine of up to RM1,000
• Imprisonment of up to 3 months
• Or both

The offender may also be disqualified from holding or obtaining a driving licence for 12 months, unless the court orders otherwise.

Therefore, do not drive a vehicle after cancelling its insurance unless you have confirmed that the vehicle has the required valid insurance coverage.

What About Driving Without a Valid Roadtax?

A vehicle must have a valid Lesen Kenderaan Motor (LKM) to be used legally on public roads.

The penalty should not be simplified to “RM300 for expired road tax”.

The Road Transport (Amendment) Act 2026 increases the maximum compound ceiling for certain compoundable offences from RM300 to RM500. However, the government has stated that the new RM500 maximum is intended to take effect from 1 January 2029, and the maximum does not mean every road offence automatically carries a RM500 compound.

The actual penalty depends on the offence, its classification and the applicable enforcement provisions.

What Is JPJK2?

You may see JPJK2 mentioned in documents relating to a vehicle.

JPJK2 refers to the Perakuan Pendaftaran Kenderaan, or Vehicle Registration Certificate. It is commonly referred to as the vehicle registration certificate/VOC.

It is not a special insurance cancellation form.

If your insurer asks for proof of a vehicle ownership change, follow the specific document requirements provided by the insurer.

JPJ’s current documentation identifies JPJK2/VOC as the vehicle registration document.

Should You Cancel Mid-Term or Wait Until Renewal?

It depends on your situation.

Cancel when:

• You have sold the vehicle
• The vehicle has been written off
• You no longer have an insurable interest in the vehicle
• Your insurer has advised that cancellation is appropriate
• You have another valid reason under the policy terms

Consider switching at renewal when:

• Your current policy is still suitable
• You simply want a better price
• You have already used a significant portion of the policy period
• Cancelling now would result in a small refund

Before cancelling, compare the expected refund with the cost and benefits of your new policy.

Can I Cancel My Insurance and Buy From Another Insurer?

Yes.

You can change insurers, but make sure the new policy is active before you start driving the vehicle.

If you are cancelling an existing policy and transferring your NCD, inform the insurer about the NCD before buying the new policy.

This helps avoid unnecessary problems when applying your accumulated discount.

Conclusion

Cancelling car insurance is possible, but you should check the refund, NCD and LKM implications before doing it.

If you have sold your car, contact your insurer and arrange the cancellation or other required changes. If you are simply looking for a cheaper policy, compare the potential refund against the cost of cancelling before making a decision.

Remember that Malaysia’s road tax system is now digital for eligible private vehicles. Instead of relying on an old physical road tax disc, check your e-LKM through MyJPJ or the JPJ Public Portal.

Most importantly, never drive without the required valid motor insurance and LKM.

If you are changing insurers, you can compare car insurance quotations through Bjak before purchasing your new policy.