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How Does Scrapping Your Car Impacts Insurance Policy?

Published On Nov 28, 2021 11:00 AM By InsuranceDekho

The Government of India had recently introduced a new vehicle scrappage policy that will scrap old cars that are failing to meet the fitness standards. If you have an old car and are worried about it getting scrapped under this new policy or its effect on your motor insurance policy? Read this article to find the answer.

What Is A Scrapped Car?

A scrapped car is a severely damaged car that becomes irreparable. It is valued only for the weight of its materials such as rubber, glass, iron, and so on. The vehicle scrappage policy introduced by the government has issued some guidelines on how old cars must be scrapped or abandoned. Under this program, old cars will have to undergo a compulsory fitness test and the ones who pass this test can be re-registered and the others will go through the process of scrapping. 

Under the new government policy, a 15-year old car will have to get a valid fitness certificate for the renewal of the registration certificate for another five years. The vehicle scrappage policy will provide assistance in discontinuing old, useless, and unfit vehicles. It comes into effect soon after the registration period of the car gets over.

Does Scrapping The Car Impacts The Insurance Policy?

Scrapping a car surely brings effect on the car insurance policies. An old and unfit car is always dangerous to drive which increases the liability of the motor insurance providers for which they charge a higher premium. But, after the car gets scrapped, you will not have to pay a high premium for your car insurance plan. You can avail a car insurance premium calculator to find the estimated premium to renew your old car.

In the case of a totalled car, which refers to cars whose repair costs are more than their market, the car insurance company may extend an offer to purchase the car from you. But, if your car is scrapped, the insurer will make the payment to you for the value of the car in addition to the amount which they get from the junkyard. But, if you choose to keep your totalled car instead of getting it scrapped, you will get a lesser amount as it will not comprise the value of the junk metal. So, scrapping your totalled car can get you a higher claim from your insurer.

Should You Cancel Your Policy Before Scrapping Your Car?

According to the Indian motor laws, it is compulsory for everyone to get their car’s Registration Certificate (RC) cancelled before getting it scrapped. The car owner is responsible for cancelling the RC in the situation of total damage. It helps to keep a track of the vehicles which are no longer in use. The RC of a car does not change with the car’s ownership, therefore, cancelling the RC refers to the scrap and unusable form of car.

After the scrapping of the car, you must also cancel your car insurance plan as it helps avoid the theft and misuse of documents of your car. The premium of your car insurance policy will be given back on a pro-rata basis. However, the cancellation of policy is not possible if you had raised a claim in that policy year.

Conclusion

Scrapping of old and unfit cars has become a compulsory mandate in India. It is beneficial to scrap an unfit car from an environmental point of view, but also safer to avoid driving it on the road. It also impacts the insurance policy in different ways which you can get to know in the above-mentioned article. We hope this will help you deal with your policy in case of scrapping your car.

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Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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