What kind of motorcycle insurance requires cancellation procedures?
There are two types of insurance for motorcycles: “compulsory automobile liability insurance,” which is mandatory for all automobiles (including two-wheeled and mopeds), and “optional insurance,” which is optional and covers areas not covered by compulsory automobile liability insurance. If you decide to sell your motorcycle, you will need to cancel both types of insurance.
In both cases, cancellation procedures are handled by the insurance company with which you have a contract, but in the case of compulsory automobile liability insurance, the procedures for joining are often entrusted to the store where you purchased the motorcycle. In such cases, the vehicle owner may not know the insurance company, but the name of the insurance company is listed on the compulsory automobile liability insurance certificate, so please check.
Compulsory automobile liability insurance is cancelled through the insurance company listed on the compulsory automobile liability insurance certificate.
How do I cancel my motorcycle insurance?
To cancel insurance, you must go through the procedures for both your compulsory insurance and voluntary insurance.
Compulsory automobile liability insurance
In the case of compulsory automobile liability insurance, motorcycle shops and other establishments may act as agents for insurance companies, but cancellation procedures cannot be carried out through the agent, so they must be carried out directly with the insurance company. Also, the documents required vary depending on the insurance company, so you will need to contact the insurance company for specific details. For reference, we have introduced examples of the necessary documents below.
・Compulsory automobile liability insurance (mutual aid) certificate
・Documents proving that the motorcycle has been scrapped (such as a certificate of return of the vehicle inspection certificate or a certificate of return of the light vehicle registration certificate)
・Identification documents (such as a driver’s license or health insurance card)
・Bank account number to which the cancellation refund will be transferred
Of the above, details regarding the cancellation refund will be discussed later, but in essence it is a portion of the insurance premium that is refunded upon cancellation.
When canceling compulsory automobile liability insurance, you may need to provide proof that your motorcycle has been scrapped.
The procedure also differs depending on the insurance company, so please check the details on the website or inquiry desk of the insurance company you have a contract with. Recently, in addition to being able to complete the procedure on the official website, some companies also allow you to take a photo of the necessary documents and complete the procedure using a dedicated smartphone app. It is likely that the simplification of procedures using online services will continue to spread to all companies in the future.
Voluntary insurance
On the other hand, when cancelling optional insurance, the procedures and required documents vary depending on the insurance company you are currently in contract with. There are also a wide variety of companies, from those that only require you to call to those that require you to fill out a form on their website.
By the way, unlike compulsory insurance, with voluntary insurance, you may be able to cancel the policy at an insurance agency. If your regular motorcycle shop is also an insurance agency, they may be able to handle the cancellation process for you, so it’s a good idea to ask.
Insurance premiums may not be refunded
For both compulsory and voluntary automobile liability insurance, you may be able to receive a refund for the insurance premiums paid from the date of cancellation to the maturity date.
Compulsory automobile liability insurance
First, there is compulsory automobile liability insurance. Insurance premiums are generally calculated on a monthly basis, but in actuality, monthly premiums for 24 or 36 months are often paid in one lump sum at the time of contract. In such cases, if there is at least one month of insurance remaining at the time of cancellation, you can receive a “surrender value” from the insurance company.
A surrender value (or “surrender amount” depending on the insurance company) is the money you can receive from the insurance company when you cancel your insurance contract midway. As mentioned above, compulsory automobile liability insurance is calculated on a monthly basis, so please note that if the remaining period (the period from the cancellation date to the maturity date) is less than one month, you will not receive a surrender value.
The amount of the refund also varies depending on where you live. For example, if you live on the main island of Honshu, Hokkaido, Shikoku, or Kyushu, or on the main island of Okinawa, or on the outlying islands of Honshu, Hokkaido, Shikoku, or Kyushu, the amount will also vary depending on the remaining contract period. If you would like to know in advance how much your refund will be, we recommend that you inquire with your insurance company.
Voluntary insurance
Basically, with optional insurance, the premiums for the period that has elapsed from the first day of the insurance period to the cancellation date are deducted, and the remaining amount is returned as a surrender value (or cancellation refund). However, depending on the status of premium payments, you may be charged additional premiums.
Similarly, the calculation method for the refund amount varies depending on the insurance company. Furthermore, it also depends on whether the premium payment method is a lump sum or installment payment, so please check with your insurance company for specific details.
Grades can be carried over with a suspension certificate
In addition, when it comes to voluntary insurance, there are some points to note regarding the grade.
Grades are a system that determines discounts and surcharges on insurance premiums based on accident history. When you first sign up for voluntary insurance, you generally start at grade 6, and if you have no accidents for a year, you will move up one grade to grade 7. Conversely, if you have an accident and an insurance claim is paid, your grade will go down. The higher the grade, the higher the discount rate, with the maximum discount rate being at grade 20.
In the case of voluntary insurance, there are some points to note regarding the grade.
If you cancel your voluntary insurance midway through, if you decide to ride a motorcycle again in the future, your voluntary insurance will generally start again at grade 6. However, there is a way to use a system called “interruption” to keep the grade you had before cancellation.
This is possible by issuing a suspension certificate at the same time as canceling your voluntary insurance. For example, if you are in grade 15 at the time of cancellation, you can keep your grade at 15 for up to 10 years as long as you have a suspension certificate.
If you use this system, when you start riding a motorcycle again, you will not have to start from Grade 6, so you will likely receive a larger discount on your insurance premiums and be able to reduce your burden. This system can also be used when you cancel your voluntary insurance for reasons such as a transfer, studying abroad, or other long-term stays abroad.
In any case, you will stop riding your motorcycle for the time being, but if there is a possibility that you might ride a motorcycle again within 10 years, you should consider getting a suspension certificate just in case.
Be careful about the grade when switching insurance companies
Another thing to be aware of is if you are planning to cancel your current voluntary insurance and switch insurance companies, even if you are not giving up your motorcycle. In such cases, the same insurance grade may be carried over for one year from the time of signing the new contract.
For example, if you have optional insurance that starts on June 1, 2024 and expires on June 1, 2025, and you cancel it on March 1, 2025 and sign up for optional insurance with another insurance company on the same day, and that person is, say, in grade 15, and does not use the insurance for a year without any accidents, they would normally rise to grade 16 on June 1, 2025. However, if you cancel and switch insurance companies, the same grade (in this case, grade 15) will be carried over for one year from the time of the new contract.
In other words, if you continue with your previous contract and renew it on June 1, 2025, without any accidents for a year, you should be in grade 16 until June 1, 2026, but you will remain in grade 15 from March 1, 2025 to March 1, 2026. In such a case, you may not benefit from the discount rate and may end up losing money on your insurance premiums. Therefore, if you are thinking of switching insurance companies, it is best to do so when your current voluntary insurance contract expires.
As such, it is important to be careful, especially with voluntary insurance, as you may incur unexpected losses if you do not pay close attention to factors such as grades when canceling the policy.
