There’s a massive range of reasons why customers sometimes need to cancel their insurance policy. For some people, they’ve sold their vehicle – for others, they’ve simply found a better deal elsewhere.
Since there are different ways to pay for your insurance – along with different rules depending on when you cancel, we’ll help you explore the subject in more detail, so you can make sure you get any refund you’re entitled to.
Can you get a refund on car insurance?
There’s no quick yes or no answer when it comes to insurance refunds; instead, there are a few different situations to consider.
The answer will depend on whether or not your cover has started, whether or not you’re within a 14-day ‘cooling-off’ period, and whether you’ve made any claims.
We’ll look at each of those in a little more detail, so you can find information that’s relevant to you.
Cancelling during your cooling-off period
All insurance products are regulated by the Financial Conduct Authority (FCA) – and are therefore subject to a minimum 14-day cooling-off period. This gives customers a chance to consider their purchase in more depth – and cancel, without penalty and without giving any reason.
Now, that doesn’t mean that you won’t be charged an admin fee for doing so – and admin fees can be quite high – but beyond this, you should receive a refund of any money paid.
Cancelling outside your cooling-off period
So, we’ve covered what happens if you cancel within the FCA cooling-off period – but can you get a refund on car insurance outside this window?
Well, the answer is generally yes – but how much you get will depend on a few different factors. For example, if you’ve paid your premium upfront, you might assume that you’ll get a full refund for any months not yet passed – but this isn’t likely to be the case.
Exact refund practice varies from company to company, but generally speaking, insurers don’t refund the last 2 months of cover. So, if you’re 6 months into your policy without any claims, you’ll often get 4 months refunded minus any admin charge that the company makes.
Can you get a refund on car insurance if you pay monthly?
Although we’ve covered what happens if you’ve paid your insurance upfront for the year and decide to cancel, this is actually fairly rare – as most people pay for their insurance monthly.
First and foremost, if you do pay monthly, it’s vital that you don’t just cancel your Direct Debit and hope that the insurance company will understand this to be your way of cancelling. Quite simply, they won’t – and you may end up the subject of debt collection proceedings.
Instead, you’ll need to let your insurance company know you’re going to cancel – and listen to details about any cancellation fee they will charge. This information will be contained in the introduction pack you received when you took your insurance out – so you can also track it down there too. Although you might be entitled to some refund of the month’s instalment you’ve paid – this is likely to be cancelled out by the admin charge your insurer will make – and in fact, you might end up having to pay towards this charge.
What happens if you’ve made a claim?
If you’ve already had to make a claim on your insurance and you need to cancel afterwards, you will still be able to – but you’ll normally have to pay the rest of the policy off to do so – meaning no refund.
If you’re paying for your insurance monthly and you need to cancel after a claim, you’ll actually need to pay the rest of your policy off – usually in one lump sum. Again, this might not feel fair, but it’s standard practice for insurance companies and ensures they cover as much of the money they’ve paid out for the claim as possible.
Can you get a car insurance refund after selling a car?
When it comes to selling a car, your car insurance company will generally be quite flexible – but that flexibility only really applies if you’re going to insure your next car with them too.
Rather than cancel your policy, they will transfer the cover to your new vehicle – making adjustments to the premium based on the new car. You may find your price goes up or down a little when you’re behind the wheels of your new car – but that’ll generally be reflected in a change of Direct Debit amount.
If you’re planning on selling your car and you won’t need insurance going forward (if you’re driving a company car or going carless – for example), then your insurance company will generally just treat the situation as if you’re simply cancelling – and the fees we’ve already talked about above will apply.
If my insurance is cancelled do, I get a refund?
Since we’ve talked in detail about what happens if you decide you no longer want or need your car insurance policy, it’s also worth understanding what happens if your insurance company decide they no longer want to provide you with insurance.
It’s rare that this happens – and it usually only happens for a small number of reasons. Including:
- Non-payment of your premiums
- You haven’t disclosed important information
- Your insurer believes there to be fraudulent behaviour relating to your cover
Refunds will vary from company to company if your insurance is cancelled – so it’s best to talk directly to your provider to see what you’ll be entitled to. Be warned though, the charges that relate to cancelled policies can be large – and getting insurance in the future can be incredibly difficult if you’ve had a policy cancelled.