Our guide explains how to cancel your car insurance policy and what costs you may have to pay when cancelling cover
Buying car insurance is not just a huge expense, but a big commitment, lasting 12 months (or longer if you auto renew). But things can change: maybe you found a cheaper deal elsewhere, want to sell your car, or simply don't want to be tied down to your car insurance policy any longer. In this guide we explain everything you need to know, from how to cancel car insurance, car insurance cancellation charges, and the all-important 14-day cooling off period.
The first thing you need to know about cancelling car insurance is that it is possible – you are allowed to do it (but remember your car must be insured at all times, so make sure you don't leave any gaps between cover). Unfortunately, the second thing you need to know is that there is almost always a catch, which involves having to pay a car insurance cancellation fee and possibly some other admin charges. In this guide we explain all the situations where you might be required to pay a car insurance cancellation fee, and how to cancel car insurance without paying a penalty or at least doing so in the cheapest possible way.
Having a one-year commitment to your car insurance policy can feel like a burden, but the truth is you can cancel at any time. And if you know what the rules are relating to your car insurance cancellation policy, then you can avoid paying a hefty fee when you do eventually need to cancel.
You might be only a few months into your car insurance policy, but need to raise some money by selling your car, or maybe you’ve shopped around and realised another insurer can give you a better deal. Perhaps, you've made a claim on your insurance, and you are now worried that the insurer won't let you cancel the policy. Or perhaps you pay for your car insurance in monthly instalments and want to know if will still be able to cancel your car insurance. The answer is yes to all of the above, but there is still a lot to know before you pick up the phone to cancel your car insurance policy.
Cancelling your car insurance early
You can definitely cancel your car insurance early regardless of your reasons for doing so. However, the type of charges and how much you will have to pay for cancelling early will depend on your insurer's policy, how much you have already paid for your cover, and how long you have left on the insurance term.
If you pay for your car insurance on a monthly basis, the longer you have left on your insurance policy term, the more you will likely have to pay to cancel your car insurance. Similarly, the less you have paid already, the more you will have to pay in order to cancel your car insurance policy early. Each car insurance provider has a different policy when it comes to cancelling so check your insurance documents first.
In most cases you should still be able to get a refund on some of the months remaining on your insurance term. Nonetheless, all of the extra features you are paying for on your car insurance policy, such as breakdown cover and legal expenses cover, are likely to be non-refundable. So if you cancel your car your insurance, you probably won't get the money back on those features. You will also lose your no claims discount for cancelling your car insurance policy early.
However, there is one way to cancel your car insurance early without paying anything (well, almost). But you have to do it during the cooling off period.
What is the car insurance cooling off period?
You may have heard of the 14-day cooling off period when researching how to cancel your car insurance policy. Luckily, it can help you cancel your car insurance without having to pay anything (although there might be a catch depending on your insurer).
The cooling off period is a legal requirement for all car insurance policies. It is usually applicable for the first 14 days of when the cover starts or when your policy documents are sent to you, whichever is later. Some car insurance companies will have a longer cooling off period, but as a minimum this period is 14 days and that is generally what most policies will have.
During this period you are free to change your mind and cancel your policy for any reason at all. Some insurers will charge an administration fee for cancellations during the cooling off period, but this will still be a lot cheaper than what you will pay if you cancel any time after. Before you buy any car insurance policy read the cancellation terms and definitely check the details surrounding the cooling off period.
Getting a refund after cancelling car insurance
If you pay for your car insurance monthly, you are not necessarily paying for the cover month to month. This is technically a credit agreement allowing you to spread the cost of your 12-month insurance policy over a monthly basis. With this in mind, cancelling your car insurance even if you pay monthly does not mean that you aren't going to be subjected to the same cancellation charges as someone who paid for the policy upfront.
The cancellation charges will vary depending on your policy and how long you have left on your policy, but if you pay monthly, you will probably have to pay an extra penalty, which is calculated as a percentage of the total policy price.
You are, however, most likely entitled to a refund when you cancel your car insurance regardless of whether you pay monthly or upfront (unless you have made a claim that year – more on this below). Most insurers will not offer a refund if you are cancelling with only two months to go, so if you are that far into your policy, it will usually be cheaper to just see it through to the end. You will usually be refunded on a pro rata basis for the months you will not be receiving car insurance cover for, minus the last two months and all the cancellation charges.
Before cancelling, especially if you are planning to switch to a cheaper deal, read the cancellation conditions and see if the savings of your new deal outweigh the costs of cancelling your current car insurance policy. Bear in mind that you will lose any no claims bonus too, so decide if it's worth sticking around to claim that.
Can I cancel my insurance if I'm selling my car?
You can cancel your car insurance if you are selling your car, or for any reason. But if you are selling your car and not planning to get a new one, you absolutely should cancel your insurance. If you were planning to get a new car to replace the one you are selling, speak to your insurer and see if they will cover the new vehicle to avoid you paying a cancellation fee. If you’re not happy with their quote, you can shop around and cancel your current policy if the savings on the new policy will outweigh the cancellation fees — just remember that you may lose any no claims bonus.
You will be charged for the administrative costs of updating the policy, but you could also find your premiums increasing if the insurer finds there is added risk with insuring your new car. On the other hand, your new car could be in better condition and in a lower insurance group, meaning you could get cheaper car insurance from the same policy.
However, if you decide your car insurance still isn't going to work out for your new car then it could work out cheaper to move to another deal. Just bear in mind all of the costs that could come up when cancelling. It may end up being cheaper to stick with the same deal.
Cancelling car insurance after making a claim
You can still cancel your car insurance even after you have already made a claim. Unfortunately, you won't be able to claim a refund on any months you have already paid for. Plus, if you pay monthly, you will have to pay off the remainder in a final lump sum. This is the area of cancellation you ought to be wary of. If you have made a claim and want to cancel, weigh up if it's worth it, as it could be quite expensive.
Cancelling at the end of your car insurance policy
If you let your policy auto renew, his means that you will be pulled into another 12 month deal with your insurance provider. If your cover is coming to an end and due to renew, it’s a good idea to shop around on a price comparison website like uSwitch to see if you could get a better deal than the renewal price offered by your current insurer. If you find a better quote, simply call your insurer and ask them not to renew your cover. If you ask them to cancel the policy effective of the day it was due to come to an end, you will not be charged a cancellation fee.
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