How to Cancel Your Vehicle Insurance Policy and Get a Refund in Malaysia

Selling your vehicle? Here’s how you can cancel your insurance policy and claim back any unused premium.

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Many vehicle owners in Malaysia are unaware that they may be entitled to a refund on their unused vehicle insurance premium after selling their vehicle. In fact, it is estimated that up to 50% of vehicle owners do not realise they can claim back part of the premium they have already paid for coverage they no longer need.

If you’ve recently sold your car or motorcycle, cancelling your insurance policy could help you recover some of that unused cost. Here’s what you need to know about the process and when it makes sense to do it.

When should you cancel your vehicle insurance?

There are several reasons why someone may want to cancel a motor insurance policy. Some motorists consider cancelling their existing policy to switch to another insurance provider before the policy expires.

However, this is generally not recommended. Cancelling an insurance policy involves cancelling your road tax first, and this process requires dealing with the Road Transport Department (JPJ), which can take time and additional paperwork.

For most vehicle owners, the most practical time to cancel a policy is after selling a vehicle. Since the insurance is no longer needed, claiming a refund on the unused premium can help offset some of your ownership costs.

How to cancel your insurance policy

The cancellation process depends on how you purchased your insurance.

If you bought your policy through an insurance agent, the process is usually straightforward. Simply contact your agent and request a policy cancellation. In most cases, they can assist with the paperwork and submit the refund request on your behalf as part of their service.

If you purchased your insurance online through a self-service platform, you will need to complete an additional step before your insurer can process the cancellation.

Why do you need to cancel your road tax first?

Before an insurance company can cancel an active motor insurance policy, you must first cancel the vehicle’s road tax through JPJ. This is because valid motor insurance is a mandatory requirement for road tax registration in Malaysia.

As a result, insurers require proof that the road tax has been cancelled before they can terminate the insurance policy and process any refund. Vehicle owners will need to complete and submit the JPJ K6 Form when applying to cancel their road tax.

How much insurance refund can you receive?

The refund amount depends on the insurance company’s terms and conditions. Each insurer has its own refund policy, so the final amount may differ from one provider to another.

Generally, insurance companies calculate refunds using one of two methods:

• Pro-rated refund based on the number of unused days remaining on the policy.
• Tiered refund schedule, where the refund percentage decreases as more of the policy period has been used.

While the calculation method varies, one rule is fairly common across most insurers: if more than eight months of the policy period have already been used, you are generally not eligible for a refund.

Final thoughts

If you’re planning to sell your car or motorcycle, don’t overlook the possibility of claiming back part of your unused insurance premium. Although the process requires cancelling your road tax before your insurance can be terminated, the refund could be worthwhile, especially if your policy still has several months of coverage remaining.

Before proceeding, check with your insurance provider or agent to understand their specific refund policy and the documents required. Taking a few extra steps could help you recover money that would otherwise go unclaimed.