If you’ve seen a quote for car insurance that’s cheaper than your current policy, you may feel it’s worth cancelling the existing policy and taking out a new one with a different insurer. Or perhaps you plan to sell your car and therefore will no longer need cover at all. But what can you expect to be charged for cancelling your policy?
What fees can you expect?
By law, all insurance policies have to have a minimum of a 14-day cooling off period. During these two weeks, you can cancel your policy for any reason. If you do this, you should receive a refund of any premiums you’re paid, minus any days when the policy was in force. However, your insurer can charge you an administration fee for this cancellation.
If you cancel your policy after the initial cooling off period, you can expect to receive a pro-rata refund for the time still remaining on your contract. But it’s important to be aware that potentially high cancellation fees can mean this refund is very small or even non-existent.
Study the small print
The first thing you should do is refer to the policy small print. By looking at the terms and conditions of the policy document, you will be able to work out whether it’s worth paying any charge.
The cost of stopping the policy may also be affected by the amount of time left on the policy. That means that if you have a year-long policy and it only has a couple of months to go, it may be worth seeing it through and avoiding a fee. You can then look for cheaper cover when it comes to your renewal date.
Why you need insurance
It is illegal to drive a car in the UK without insurance cover. In fact, if you’re caught driving in a public place or on a road without at least third party insurance, you could receive up to six penalty points on your licence, as well as fine of £300. If your case goes to court, you can be hit with an unlimited fine and even be banned from driving. In addition, the police have the power to seize and in certain cases destroy the vehicle that’s been driven uninsured.
So, if you are thinking about cancelling your current insurance but still have a car, you will need to make sure you arrange a suitable replacement policy - with no gap during which you are uninsured.
Why premiums might have increased
If you’ve changed job or moved house, you need to tell your insurance company. The cost of your policy might have gone up as a result. It may also become more expensive if you’ve been convicted of a driving offence or want to change the nature of the cover. This could be adding another driver or increasing the level of protection.
For example, you may have had third party insurance, which would protect against any damage to the other car if you’re responsible for an accident. It won’t protect you, however. You may now want to change that. Full protection is termed ‘comprehensive cover’. These policies also pay out for any damage to your car or your property after an accident for which you’re responsible.
Cooling Off Period
If you have taken out an insurance policy then you have a minimum 14 day cooling off period as per the Financial Services Regulations 2004. Some insurance policies may give you longer but this is the minimum required by law. The cooling off period should begin the next business day you enter into the contract and last for fourteen calendar days. The insurer may charge an administration fee along with a pro-rata amount for the days insurance was provided.
To recap, you can usually expect to pay a fee in order to cancel your car insurance. If you have any further questions on this topic or would like additional information, don’t hesitate to get in touch.