Considering cancelling car insurance: Here’s what you need to know
15th January 2024
If you are considering cancelling your car insurance policy, it is important not to overlook the finer points in the policy such as lock-in periods and associated charges. Add to that the mountain of paperwork, rules, and regulations, and it can become quite overwhelming!
We've got you covered. To simplify the process, we have put together the information you might need on how to cancel your car insurance.
It is important to note that it is illegal to drive a vehicle on a road or in a public place without at least 3rd party insurance. You should not cancel your insurance without making arrangements for a new policy to start as soon as the old one ends.
What to know before cancelling car insurance
- You can cancel your car insurance at any time.
But things might be different if you are in your cooling-off period, as compared to when you are not.
- Your no-claim bonus might be affected if you cancel your car insurance.
A no-claim bonus is generally awarded if you do not make any claims for a full year. If you switch or cancel your policy in between, you might not get this bonus. But, you might be able to keep any previous bonuses earned in the past years.
For example, consider that you have accrued four years of no-claims bonus and you want to cancel your new policy after two months. If you have not made any claims in these two months, you will still have your four years.
Generally, you will find proof of your no-claims in the cancellation notice that the insurer provides. If not, you will need to ask for a copy. Please note that this proof is usually only valid for two years. After this, you could lose the bonus.
- A typical policy lasts for around 12 months. But, if you want to cancel before that, you are free to do so.
Independent advisor UK writes that you might want to cancel your car insurance earlier under the following conditions:
- You have sold your car
- You have made a shift to another provider
- You have made a SORN
What is SORN?
According to gov.uk, if you are not using your vehicle and it's parked off-road, like in your garage or on private land, you can inform the DVLA using SORN (Statutory Off-Road Notification). This is necessary if you want to stop paying for road tax and insurance on the vehicle.
Even if you are not using the car and it is parked off road, you might still want some insurance to protect your car against fire and theft.
In such cases, you can also consider cancelling insurance. Please note that it is crucial to make a SORN if there are any delays in renewing your insurance after cancelling. The duration of the delay might be considered irrelevant.
What are the conditions for a refund before the cooling-off period?
The first 14 days of your cover is a cooling-off period. If you are in this period, you might have a chance to cancel the insurance with little or maybe no charge. A 14-day long cooling-off period is a legal minimum. However, some insurers might offer you a longer period.
Cancellation fees before the cooling-off period
If you cancel your policy within this period, you might receive a refund, but a reduced amount. This deduction is usually proportional to the number of days you were insured for. Apart from this, you might also have to pay an admin fee of around £25. Different providers might have varying terms and conditions. Please refer to your policy documents for more details.
What are the conditions for refund after the cooling-off period?
If your car insurance policy has already been activated and the cooling-off period (post 14 days) is over, you might still be able to get a refund if you cancel.
If you have paid your premium upfront for the entire year, most providers, in this case, will calculate the refund on a pro-rata basis. This means, as Money Saving Expert UK puts it, the longer you’ve left in your policy, the more money you’ll likely get. This means that if you were insured for four months, then you would get a refund for the remaining eight months. It's also important to note that making no claims increases your chance of receiving a pro-rata refund.
However, you might have to pay an additional administration charge. The exact amount might differ from one provider to another.
But, if you pay for your policy cover monthly, it is unlikely that you will get any refund. Apart from that, you will also be liable for the admin and cancellation charges, which might end up costing you extra.
Cancellation fees after the cooling-off period
If you cancel, then the insurance provider may charge you a cancellation fee. This could come up to about £55. Additionally, they might charge you extra administration fees up to £25. The exact amount varies from one provider to another.
Why you might get no refund or less refund for cancelling your car insurance
These are the conditions under which you might get less or no refund:
If you have made an insurance claim
If you have made a claim on your insurance and decide to cancel later, you can probably still do so. However, you might have to settle the remainder of the policy without receiving any refund.
In a monthly payment plan, after a claim, in most cases, you are required to pay for the rest of your policy. This is usually done in a lump sum. While it might not seem entirely fair, this is a standard practice among insurance companies to recover as much of the costs associated with the claim payout as possible.
If you pay monthly
If you are on a monthly instalment, you might not get a refund. You might also be liable for other charges like adjusted premiums and cancellation fees. You might even end up paying extra for the time you were insured.
How to cancel your car insurance if you pay monthly?
You can cancel your monthly policy at any time.
In most cases, you will have to follow the entire process of cancellation, like in any other policy. Simply cancelling the auto payment will not be enough. You should contact your insurer and inform them about your decision to cancel. They might be able to assist you through the cancellation process and provide information about any applicable cancellation fees. You can find this information in the introduction pack of your insurance policy.
Cancelling the direct debit of the monthly premium may be considered a breach of policy and may appear on your credit report as a “missed payment” which could impact your credit score.
If you have extra add-ons
Your refund usually does not include any optional insurance add-ons, such as “breakdown cover”. Instead, it's necessary to get in touch with the relevant service providers directly to cancel these add-ons.
How to cancel car insurance
This is a fairly straightforward process in most cases. But it's essential to follow the correct steps to avoid any complications. Here is what you should do:
- Review the cancellation terms:
Pay special attention to any cancellation fees, notice periods, and potential penalties.
- Review your documents:
Gather all your policy history and premium payments-related documents. Insurers usually ask for the policy number and renewal date for the procedure. Along with that, keep your identification documents handy.
- Contact your insurer:
You may be able to connect directly by call/mail or through their online portal if available.
- Cancellation and refund:
Once you notify the insurer, they provide a cancellation notice in most cases. This also contains any proof of your no claim bonus. The company will return any refund that is owed to you.
What to do in case of any disputes or challenges in the procedure?
In some cases, there can be disputes in the cancellation or refund procedure. If you have a complaint you should raise it directly with the insurer.
Should I cancel my car insurance if I sell my car?
Yes, if you're selling your car, make sure to cancel your car insurance. But do it only as the sale completes.
Instead, you can ask your provider to transfer your current policy when getting a new car. There might be an admin fee and a slightly higher premium.
It is okay to stay cancelled if you are not going to drive again. But, if you drive without car insurance, the police could issue a fixed penalty of £300 and six penalty points. If the case goes to court, you could get an unlimited fine and disqualified from driving.