Termination of compulsory liability

What is compulsory liability

Compulsory third party insurance, or third party liability insurance, is a legally compulsory insurance for motor vehicle owners. It is used in case you cause damage to the property or health of third parties with your vehicle.

Its obligation makes sense in that car accidents are not uncommon and damage to property or health is usually associated with car accidents. In the event that you were not insured, you would have to pay for all repair and treatment costs yourself. This can run into millions of dollars. Most of us just don’t have these sums in our bank accounts, so it could be common for the people who caused the damage to go into debt or for the injured person not to be compensated and for protracted and unresolvable disputes to arise.

Who is obliged to pay compulsory liability insurance

Every owner of a motor vehicle must pay compulsory insurance, regardless of whether it is a regular car, motorbike, electric scooter, van or tractor. The condition is that the vehicle must have a registration plate, a roadworthiness certificate or be used on public roads.

However, there are exceptions. The first applies to vehicles insured abroad. In this case, however, a green card must be presented (with the new law, the obligation to present a green card will be abolished; however, the abolition is not likely to happen until around the eighth month of this year). Vehicles of the Ministry of the Interior and Defence, police, volunteer firefighters and emergency services are not required to have compulsory liability insurance.

What is covered by compulsory liability insurance

The insurance covers damage caused by you to someone else. It does not therefore cover damage to your property or health, but to the property or health of a third party. It therefore covers damage to your property, health and, if applicable, loss of earnings. In addition, however, the insurance also covers the costs oflegal representation.

However, damages are only covered up to a certain limit. The legal minimum limit is CZK 35 million (this year this limit will be increased to CZK 50 million). You can also take out insurance for a higher limit of up to CZK 250 million.

Price of compulsory liability

Compulsory third party insurance is compulsory, but you can arrange it with the insurance company of your choice. Therefore, the price of compulsory insurance varies. The type of car involved and the type of person taking out the insurance also affect the price. In particular, the following play a major role:

• Thetype of vehicle: The size and type of vehicle significantly affect the price of insurance. In general, heavier and more powerful vehicles can cause more damage, which of course also leads to higher claims costs and higher insurance prices.
• Purpose of use (personal use/service): Service vehicles will have higher premiums because they are on the road more often and therefore have a higher risk of accidents.
• Mileage: The frequency of vehicle use and annual mileage can also affect premiums. Vehicles that drive a lot of miles per year are naturally on the road more often and more exposed to potential accidents. For this reason, their insurance premiums are higher.
• Fuel type: Vehicles that run on different types of fuel have different insurance rates. For example, electric vehicles have lower premiums due to lower operating costs and less risk of fire.
• Age of the insured: Younger drivers pay higher premiums because they are statistically more likely to be involved in accidents. Premiums then tend to decrease with age and experience.
• Residence of the insured: The location where the driver lives and where the vehicle is predominantly used also affects premiums. In areas with higher traffic density (i.e. especially in large cities), premiums are higher.
• Bonuses and malus: The bonus and malus system reflects your insurance history. Drivers who drive without accidents receive discounts (bonuses), while those with a history of accidents will face surcharges (malus) on their premiums.

Termination of a contract of compulsory guarantee

You may wish to give notice of termination of a compulsory liability insurance contract for various reasons. Let’s see how to do it.

When can you terminate a compulsory surety

It is possible to cancel a compulsory liability insurance policy if you sell your car or dispose of it in another way (for example, by liquidation or donation). However, you can also cancel if you are not happy with a particular compulsory liability policy from your insurer. Of course, you should take out compulsory insurance with another insurer straight away.

How to terminate compulsory liability

If you are disposing of your vehicle, whether by sale, liquidation or donation, you must cancel your compulsory liability insurance. Otherwise, it will continue to apply and you will also have to pay. You will therefore need to send your insurer a compulsory insurance cancellation form and attach a document proving that you no longer own the vehicle (e.g. a contract of sale, a donation agreement or a vehicle de-registration record).

However, if the car remains in your possession and you want to cancel the insurance for other reasons, you have several options:

1. If you took out the insurance less than two months ago, you have the option to cancel the policy without giving any reason. The termination of the insurance will then take place eight days after your notice is received.
2. You can also cancel the insurance contract if the end of the insurance period is approaching. However, you must send your notice at least 6 weeks before the end of the policy period (the end of the policy period can be found in your policy or on your green card).

1. It is also possible to terminate the compulsory liability insurance by agreement with your insurance company. However, this is not a very common situation.
2. In the event of a premium increase, you have the right to terminate the insurance within one month of notification of the premium change. However, this does not include a change based on your bonuses and malus.
3. If there has been an accident and you are not satisfied with the insurance company’s behaviour, you have the option to cancel the insurance. In this case, the notice must be sent within three months of the occurrence of the insured event.