Car insurance is a big commitment as most insurers need you to commit to a minimum of a year. However, there may be times when you need to cancel or move your car insurance policy elsewhere.
There will probably be costs involved but the important thing to remember is that you can cancel your car insurance.
Buying car insurance is not just a huge expense, but a big commitment, lasting 12 months unless something prompts you to cancel. Possible reasons include:
you’ve shopped around and realised another insurer can give you a better deal
you are selling your car
you are storing your car off-road (SORN)
you need to make changes, such as moving home, increasing cover or adding a driver and your current insurer is uncompetitive
you've made a claim on your insurance and had a poor claims experience
It’s always best to shop around for your car insurance and compare quotes to get the best deal.
If you only have a few weeks or months left on an annual policy and you’re looking to swap to a cheaper insurer, you should read the cancellation conditions. It’s possible the savings of your new deal will outweigh the costs of cancelling your current car insurance policy.
The first thing you need to know about cancelling car insurance is that it’s possible.
However, you need to remember that:
your car must be insured at all times if it’s on the public roads - even if it’s just parked - so you must not leave any gaps between cover
you may have to pay a car insurance cancellation fee and possibly some other admin charges
insurers don’t tend to refund premiums if the cancellation request is made with two months or less to go on the term
this has a knock-on effect on how much you’d get back if you cancel earlier. For example, cancel after six months and you may get four months’ worth of your premium back
You’re well within your rights to cancel your policy if you pay on a monthly basis, even though you’re tied in for the year. However, you’ll face a cancellation fee, which could be greater than that imposed on someone who paid up-front.
The size of the cancellation fee will depend on the following factors:
your insurer's cancellation policy
how much you have already paid for your cover
how long you have left on the insurance term
While you’ll get some money back or avoid paying further instalments, which will be more than you’ll pay in cancellation charges, you’ll lose your no claims discount (NCD) for that year if you cancel early. That said, any previous years NCD will remain, so if you already have the maximum NCD, this is less of a concern.
Under law you have 14-day to cancel your car insurance policy. This cooling-off period exists to allow policyholders to take stock of what they have bought.
During the cooling-off period you’re 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’ll still be a lot cheaper than what you’ll pay if you cancel any time after 14 days.
In accordance with the law, the 14-day period kicks in when your policy starts or when you receive the relevant policy documents, whichever is later. However, it’s worth perusing your policy documents, as some insurance companies have a longer cooling-off period.
If you want to cancel your policy call or email as soon as possible to ensure the cancellation process is started.
All of the extra features you’re 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 insurance, you probably won't get the money back on those features.
You can cancel your car insurance for any reason. If you cancel because you’re not using your car, ensure it is off the road and you have obtained a Statutory Off Road Notice (SORN). If you are selling it, inform any potential buyer that it’s not insured so they can get temporary car insurance if they want to drive it away.
If you’re plan is to sell so you can buy a new car it’s worth speaking to your insurer and see if they’ll cover the new vehicle so you can avoid any 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 outweigh the cancellation fees. However, before you do so bear the following in mind:
you get charged the administrative costs of updating the policy
your premium will increase if the insurer finds that insuring your new car is an increased risk
your new car could be in better condition and in a lower insurance group, so, you may get cheaper car insurance from the same policy provider or elsewhere.
if you’re offered a cheaper car insurance quote elsewhere, see if your current policy provider will match it
You can cancel your car insurance even after you have already made a claim, However, bear the following in mind:
you won't be able to claim a refund on any months you have already paid for and you may not get a refund on any months remaining on your current term – check the policy document before cancelling
if you pay monthly, you will have to pay off the remainder in a final lump sum
This is the area of cancellation of greatest concern. If you have made a claim and want to cancel, weigh up if it's worth it, as it could be quite expensive.