How Scrapping Your Car Impacts Insurance: Refunds, Transfers & More
Scrapping a car is not that difficult but it may take some time to find a good scrapyard. It is usually the final option when repairs cost more than the vehicle’s worth or when it no longer runs. But have you ever thought about what happens to your car insurance after scraping it? Are you thinking of canceling your policy immediately, or can you transfer it? Many people take this part for granted, but understanding the impact of insurance will save you a lot of money and save you from different troubles.
Today, we will discuss how scrapping a car affects insurance, what you should do, and how to handle any remaining payments.
Does Scrapping a Car Automatically Cancel Insurance?
No, scrapping a car does not automatically cancel your insurance. You must inform your insurance company about the current vehicle’s status. Keeping a good credit score is very important when it comes to taking loans. Suppose, if you are not paying your premiums the company will count it as non-payment issues. So do not stop paying premiums without canceling the policy. Do not forget to call your insurer before making any changes.
Should You Cancel Your Insurance After Scrapping a Car?
Yes, you should cancel your insurance once your car is scrapped. Keeping insurance on a car that no longer exists does not make any sense. However, if you are planning to buy a new car then you may transfer your policy instead of canceling it. Some insurers give better rates to long-term customers, so do not hesitate to ask for policy discounts.
Also Read: Scrap Car Removal Laws Across Canadian Provinces: What to Expect
What Happens to Your No-Claims Bonus?
Your no-claims bonus (NCB) stays as it is even after the car scrapping. Most insurers will allow you to carry it forward if you buy a new vehicle. However, if you go without insurance for a long period, you might lose it. Do not forget to check everything with your service provider to know how long they will honor your NCB.
Will You Get a Refund on Your Insurance?
You will get a refund if you have paid your premium in advance. Insurers usually give prorated refunds based on how much time is left on your policy. However, some companies will take a cancellation fee, so read all the things carefully before requesting a refund.
Do You Need to Inform the Government?
Yes, you need to tell your local vehicle registration authority. In Canada, you need to inform the provincial transportation department and give the car’s license plates. If you do not follow this step, the government will still hold you responsible for the vehicle, even after the car is scrapped.
Also Read: A Complete Checklist of Documents You Need to Scrap Your Car in Canada
What If You Have a Multi-Car Insurance Policy?
If your scrapped car had more than one policy, you should inform your insurer as soon as possible. Suppose, if you remove one vehicle then it will directly affect the premium of it. In some situations, your policy cost will increase because multi-car discounts no longer apply. Do not forget to confirm with your provider to see how the change will impact your insurance.
What If the Scrapped Car Was Financed?
If you still owe money on the car, you cannot cancel the insurance until you clear the loan. The lender has the right to demand full payment before you scrap the vehicle. The best thing is that once you pay off the loan, you can simply inform your insurer and start the scrapping process.
Can You Transfer Insurance to Another Vehicle?
Yes, the best part is you can easily and anytime transfer your existing insurance to a new vehicle. Some insurance companies allow policyholders to change coverage if they buy another car. This process is usually simple and can save you from cancellation fees.
What If You Had Comprehensive or Collision Coverage?
If you have comprehensive or collision coverage, you should not keep it after canceling the car. If you are someone who loves to keep some extra coverage on your car then you are just wasting your money. However, if you are thinking about a car replacement then transferring the coverage makes more sense.
How Can You Avoid Penalties When Cancelling Insurance?
You should follow the steps below to avoid any penalties when you cancel your insurance.
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- Inform your insurer as early as possible the moment you decide to scrap your car.
- Ask for a written confirmation of cancellation.
- Do not forget to ask about any cancellation fees before making a final decision.
- Make sure you are qualified for a refund on your unused premium.
Conclusion
Scrapping a car affects insurance in different ways. If necessary, you should tell your insurer, cancel the policy, or transfer it. You should also check whether you are qualified for a refund and protect your no-claims bonus. Ignoring any of these steps can lead to unwanted fees or complications.
Before scrapping your old car, take some time to discuss your options with your insurance provider. This preparation can help you save money and avoid future issues easily. If you still have any doubts you can call the Greenway Auto Recycling team, we buy scrap cars and help you complete the paperwork.
