Cancelling Your Car Insurance Early
There are a number of reasons why you may need to cancel your car insurance early to get a new, cheaper policy; whether you write-off your car and decide not to drive anymore or if you simply aren’t happy with your insurer and want to switch providers to save money.
Perhaps you’ve found a better deal elsewhere and want to save money on your premiums, which is fair enough!
But can you just come out and cancel your car insurance early without any problems or fees?
In this guide:
Yes, you can. Your car insurance is a service provided to you by an insurer, and you are not under obligation to keep it.
You do have a legal requirement to make sure you are insured if you own a car and drive it on UK roads, but that’s not to say you have any sort of obligation with a particular insurer. You are free to get a new policy and end an existing policy at any time, but it’s likely that you’ll face a car insurance cancellation fee as a result.
Only a proportion of your annual premium (or monthly premiums if you pay by direct debit) covers the cost of insurance. Some of it covers the insurance company’s administration fees, and while you are entitled to get the first bit back, it is slightly different when it comes to the latter part.
In addition to that, it’s impossible to know what percentage of your premiums covers insurance, and what percentage pays for the administration.
When you try to cancel your car insurance early, your provider calculates how much they are required to give back to you, and how much they can reasonably charge you as part of their administration costs – and you are unlikely to know exactly what that is until you try!
The cooling-off period - Cancelling car insurance within 14 days
If you need to cancel your car insurance within the fourteen-day cooling-off period, many insurers will not charge you a cancellation fee.
What is a cooling-off period? Legally, all insurance companies must offer a two-week long cooling-off period where you are able to change your mind about taking on their services.
This cooling-off period either starts from when you receive your documents or from the day the cover starts (whichever comes later), so it may be a little longer than 14 days from the moment you made the decision to take out a policy. Be sure to check this with the provider you’ve purchased your car insurance policy with.
If you’re cancelling your policy during the cooling-off period, you will get a refund for any payments you have made, but the company can charge you an administration fee for cancelling.
That being said, it’s still a cheaper option than cancelling at a later date, and if you want to cancel your policy, doing so during the cooling-off period is certainly your best option.
Do you get money back if you cancel car insurance? What about monthly direct debits?
If you paid for your policy with an annual payment, you will receive a rebate which amounts to the remaining insurance minus any administration charges.
Realistically, most insurers will estimate about two months’ worth of insurance premiums for their administration fee, so if you are cancelling with six months left to go, expect a refund that equates to approximately four months of insurance.
Can I cancel my car insurance if I pay monthly?
Cancelling monthly car insurance is not always as straightforward as ending annual payments.
If you pay for your car insurance through monthly direct debits, the good news is that you are able to cancel your policy early and get a refund for some of the remaining months, but the not so good news is that you will still be charged an early cancellation fee, which mainly depends on where in the monthly payment cycle you choose to cancel.
For example, if you have a long time left on your policy term, it is likely that the administration fee for cancelling your car insurance will be quite high. If you only have a couple of months left on your policy, you might be better off waiting until the term has ended, as it may cost you a lot more in fees.
Expect to have to fork out an amount close to the remaining months in terms of fees, and remember that when you choose to cancel will change how much there is to pay in cancellation fees.
When your car insurance comes close to its renewal date, your provider will inform you (usually via email or post around 3-4 weeks beforehand) and usually offer to renew it automatically if they don’t hear from you.
While doing nothing may seem like the easier option, it can actually lead to higher insurance premiums – something you could avoid by being on-the-ball. Being loyal to your car insurance company is rarely beneficial, as you will often be able to compare quotes and find a better deal elsewhere if you put some effort in and make the switch.
If your policy has been automatically renewed, you may find yourself with another 14-day cooling-off period, which can help if you just reacted late and want to switch (depending on the insurer).
For many though, passing the renewal date means being locked in for another year and being required to pay cancellation fees to end their policy, so if you plan on changing insurers, don’t let the renewal date slip past unnoticed.
If you opt for auto-renewal, be sure to make a note of the renewal date when you take out the policy and get quotes with other providers beforehand to determine whether it’s worth making the switch when the time comes.
Check whether you’re insured with AskMID – the free car insurance checker.
My car is a write-off and I don’t plan on getting another one – do I have to pay if I cancel my car insurance?
If you’ve made a claim on your car insurance, then you will not be able to get any sort of refund on that year’s policy.
This means that if you are paying by direct debit, a claim early on will leave you having to make regular monthly payments even if you no longer have a car! This is just part of the reason why we always recommend paying for your car insurance annually.
Sometimes, this can lead to a situation where not making a claim and cancelling your insurance is cheaper than claiming – even in a write-off situation. Imagine your car is worth £1,500 and the excess is set to £500, with monthly insurance payments of £100 over 12 months.
If your car is involved in a crash in the second month, just after you have made your payment, then you will be expected to pay £500 excess and ten more monthly payments of £100 – a total of £1,500 and the loss of any no-claims discount.
If, however, you choose to not make a claim at all and cancel the insurance, you’ll be out of pocket the same amount but without the loss of your no-claims bonus going forward.
There are the early cancellation fees to consider too, but sadly, situations do arise where simply paying for the costs associated with an accident out of your own pocket is a better option than making a claim.
Of course, if you plan to replace your car, then keeping hold of your insurance is the right thing to do.
Read more: Car Insurance Write-Off Categories Explained
If you are getting a new car, either because of an incident or simply because you fancied a change, then your insurance company will be happy to transfer your policy over for you.
Depending on the vehicle specifications (engine size, value, safety features, etc.), it could mean a change in the cost of your policy, but it is unlikely to come with any fees such as those you would be charged for cancelling the car insurance.
If you plan on buying a car to replace your current one, contact your provider and ask them whether they will be able to cover the new vehicle – if they are willing to, you may be able to avoid the cancellation fee.
If you are selling your car and have no intention of replacing it with another, then you will need to cancel your insurance from the date you no longer have the vehicle.
Not only does this stop you from paying insurance on a car you no longer own, but it also prevents any chance of someone else trying to make a claim on your insurance in your name.
Unfortunately, there is no exception to ending a policy due to the sale of the car, so although you are entitled to cancel the policy at any time, you will still have to pay any associated fees.
A no-claims bonus (or no-claims discount) is built up for every full year of driving without any car accident claims made on your policy. If you choose to cancel your insurance early, you won’t be entitled to any additional no-claims bonus for that year, but you won’t lose any bonus that you’ve already accrued either.
If you are transferring your car insurance over to another company, many providers will be happy to continue counting your no-claims discount as part of their enticement to you as a new customer, but it’s not something they are legally required to do.
Be sure to discuss all relevant details (including what happens to your no-claims bonus) with both providers before switching or taking out a new policy with a different insurer.
If you intend to keep your policy for one of the two cars, you are likely to find the insurance company much more agreeable and the fees lighter – after all, they are keeping you as a customer. Simply let them know that you have sold, or otherwise got rid of, one of your vehicles and they will adjust the policy accordingly.
Remember, however, that you were probably receiving a substantial discount for multiple vehicles which will no longer apply if you go down to just one. It is likely that the policy for one will cost more than 50% of the amount you were paying for two, no matter which of the pair you choose to keep.
Can I remove a named driver from my insurance?
Taking a named driver off your policy is one of the many changes that insurance companies deal with every day.
It will affect your premium, so there will be a financial change (either positively or negatively, depending on the circumstances) but the insurance provider will not charge additional fees for making the amendment.
The same is true with other alterations, such as changing your address, your job title or the location where the vehicle is parked overnight. Each will have an impact on your policy costs but should not incur additional fees.
Read more: What is Named Driver Insurance?
It is often worth making a complaint if you believe your insurance company is not charging a fair amount for their cancellation fees.
In the first instance, you should follow the complaints procedure of the company – and remember to keep a record of any communication (letters, emails, etc.) so that you can refer to it later down the line.
The insurance company usually has eight weeks to determine the outcome of your official complaint. If they fail to do so or if you are not happy with their decision, you can contact the Financial Ombudsman Service who is likely to work in your favour and help you get any compensation that you deserve.
Upholding the rights of customers, especially their right to cancel, is part of the Financial Ombudsman Service’s duty and if you are truly being treated badly, they will do what they can to make it right.
Car insurance advice from Compare UK Quotes
We hope that our guide on how to cancel car insurance has been useful, but remember that we also have a wide variety of other interesting insurance-related articles to help you get the most out of your premiums.
For more information, browse our library of articles or see the related guides below: