Do I Have to Cancel My Car Insurance if I Sell My Car?

Ending your cover early if you’re selling your vehicle.

author image-cai
By Cai Bradley
Updated on Monday 23 November 2020

Handing over keys when selling car

The process of cancelling your car insurance early is relatively straightforward – you simply have to contact your insurer and let them know that you want to cancel – but there are a lot of other things to think about before doing so.

There are several questions that need answering. For instance, do you need to cancel your car insurance if you sell your car? Should whether or not you’re replacing the vehicle affect your decision? Can you get a refund for unused premiums? Are there cancellation fees?

Thankfully, we have created a guide to cancelling your car insurance if you plan on selling your car to explain everything you need to know.

Do you need to cancel your car insurance if you’re selling your vehicle?

If you sell your car, you obviously won’t be using it anymore, meaning that you will not need your insurance from the date it is sold.

However, how you go about cancelling your car insurance depends on a few different factors, including how long you have left on your policy and whether or not you will be replacing the vehicle.

Cancelling your cover if you are not replacing your car

If you plan on selling your vehicle and not replacing it, it’s usually recommended that you cancel your car insurance as soon as it’s sold and getting as much of the premiums back as possible in the form of a refund.

This is because the car will no longer be yours and you inevitably won’t be using it, so there’s no need to pay for cover.

Note that, if you sell your car with a month or two left on your insurance, the cancellation fee might be more than the refund you would receive, so many people are tempted to let the policy lapse. But be careful, if you let your insurance policy run while you no longer own the vehicle covered, there’s a chance that the new owner of the car could be involved in an accident and try to make a claim on your policy.

This could cause all sorts of issues, so err on the side of caution and cancel your car insurance if you aren’t replacing your vehicle.

Cancelling your car insurance if you are replacing the vehicle

If, however, you plan on replacing your vehicle with a new one, you may not want to cancel your car insurance policy.

Most of the best car insurance companies will offer to update your policy to cover the new vehicle, which means that you don’t have to cancel and take out cover with a new provider if you don’t want to.

You should still contact the insurer to let them know that you are selling your car and getting a new one, of course, as this will require an updated policy and could impact your premiums. If you fail to let them know that you’re driving a new car, you will not be covered.

There’s also a slight chance that your provider will not be able to cover the new vehicle, meaning that you may be required to take out cover elsewhere – it’s always best to check.

Insurance providers usually charge a fee for amending your policy, and you may be charged more expensive premiums to reflect the added risk associated with your new vehicle (for example, if it’s more valuable, it’s likely to cost more to insure).

This won’t always be the case though, and you might end up paying less for cover – it depends on your personal situation.

If you’re going to replace your car immediately, you should start by contacting your provider and asking them whether or not they will be willing to cover the new vehicle. If they are, you may not need to end your policy and could avoid paying any cancellation fees.

It is always worth shopping around and comparing quotes to determine whether you should switch providers; it sometimes works out as a more cost-effective option, even if you will be charged a cancellation fee.

Before committing to any policy – with a new provider or your existing one – you should weigh up your options and work out the overall cost of both options first.

Read more: How to get Cheaper Car Insurance

Cancelling your car insurance if you have made a claim

If you have decided that you want to cancel your car insurance, you should be able to do so even if you have previously made a claim on the policy.

You will, however, be required to pay the whole cost of the policy; you will not receive any refund if you paid up-front, and those who pay monthly for cover will be required to pay off the remaining balance as a lump-sum.

Do you get a refund if you cancel car insurance?

If you cancel your car insurance early, you will normally get a refund for some of the months remaining. Most providers won’t refund the last two months of a car insurance policy, but you should get the remainder of what you haven’t used back as a refund.

So, if you have six months left on your policy and cancel it, you won’t necessarily get six months’ worth of premiums back – you’re more likely to get a refund worth four months’ premiums.

There is also some admin involved when you cancel your car insurance – including updating the Motor Insurance Database (MID) – so an admin fee will usually be deducted from your refund.

The cost of cancelling car insurance

The cost of cancelling your car insurance policy varies considerably – it can be free for some people, but others may be subject to an admin or cancellation fee.

If you are subject to cancellation fees, they usually cost around £50, according to temporary car insurance provider Cuvva.

How much it costs you to cancel your car insurance – or whether it costs anything at all – depends on a range of factors, including how long you have left on your policy.

Read more: The Average Cost of Car Insurance in the UK

Cancelling a car insurance policy within 14 days

If, for any reason, you decide to sell your vehicle within 14 days of insuring it, the cooling off period means that you can cancel your policy and get a full refund of any premiums you have paid so far.

Depending on your insurer, they may deduct an amount from your refund in order to cover any days that your vehicle was covered for, plus an administration fee.

In short, cancelling your car insurance within 14 days of it being purchased usually results in a lower fee, or no fee at all.

Before deciding whether or not to update your policy with your current provider, be sure to compare car insurance quotes and shop around:

For more information on car insurance, be sure to check out our related guides here at Compare UK Quotes:

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