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Can you cancel car insurance?

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If you want to cancel your car insurance because you’ve found a better deal elsewhere or no longer need cover, regulations updated in 2022 make this process much easier. Just be aware that you might need to pay an admin fee. 

This step-by-step guide explains how to cancel your car insurance, how likely you are to get a refund and what to be aware of.

Can I cancel my car insurance?

Yes, you can usually cancel your car insurance at any time – you’re not tied into a contract. While car insurance policies are typically taken out for 12 months, you can cancel your policy earlier if you’ve sold your car, applied for a Statutory Off Road Notification (SORN) or renewed your car insurance early with another provider. 

Cancelling car insurance is usually a relatively quick and easy task, but there are some things to be aware of.

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Considerations when cancelling car insurance

Before cancelling your car insurance, it’s worth keeping the following points in mind:

  • You’ll usually have to pay a fee. Most insurers will charge an admin and cancellation fee for cancelling your car insurance policy. This can be around £55 but will vary depending on the insurer. If you’re cancelling your insurance because you want to switch to another, cheaper policy, it’s worth checking whether your savings will be greater than the fee you’ll have to pay
  • You’ll miss out on the current year’s no-claim bonus (NCB). You earn a discount for each year you don’t make a claim on your car insurance policy. But if you switch to another insurer before the year ends, you’ll lose your NCB for that year. How this affects your overall discount depends on how many years you’ve accumulated. For example, if you have more than five years of NCB built up, it probably won’t greatly impact your future premiums. But if you only have one or two years of NCB, it’s likely to affect future costs more significantly, so switching early might not be worth it
  • You might get a pro-rata refund if you paid annually. If you paid for your car insurance annually, you should get a pro-rata refund if you haven’t made a claim. This means that if you were five months into your policy, you’d get a refund for the remaining seven. On the other hand, if you pay for your cover monthly, you’ll simply stop paying the premiums and start paying your new premiums with your new insurer

How do I cancel my car insurance policy?

You’ll usually need to phone your insurance provider to cancel your insurance policy, but in some cases, you might be able to do this online. Remember that if you share a car insurance policy with another driver, the insurer will want to speak to the main policyholder. 

Each provider will have its cancellation process, but you can usually expect to follow the steps below.

  1. Prepare your car insurance policy documents and give your policy number to your provider. It’s worth having a copy of your certificate of motor insurance, as some insurers may ask for this
  2. Inform your insurer that you wish to cancel your car insurance and give a reason if the provider asks for one
  3. Ask the provider to explain and list any fees you must pay for cancelling your insurance policy. This will reduce the risk of an unexpected bill
  4. If you’re cancelling your policy because you’re taking your vehicle off the road, you must complete a SORN form and submit it to the Driver and Vehicle Licensing Agency

If you can’t get through to your insurance provider on the phone, you can send an email to explain that you want to cancel your policy and that you’ve been unable to contact them by phone.

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Will I receive a refund if I cancel my car insurance?

Yes, if you’ve taken out a car insurance policy and decide to cancel within the 14-day “cooling-off” period, you’re legally entitled to a refund. This period, mandated by law, grants you at least 14 days from receiving your car insurance documentation (or from when the policy starts, whichever is later) to change your mind and cancel the policy. 

If you cancel within this timeframe, you’ll receive a refund reduced by an amount proportional to the number of days the policy was active before cancellation. Your provider might also charge you an admin fee of around £25. Always check the terms and conditions of your insurer’s cancellation policy, as they will vary. 

If you cancel your car insurance policy after the 14-day cooling-off period, you might still be eligible for a refund if you haven’t made a claim. However, again, you’ll likely be charged admin and cancellation fees, which could be higher than the refund you were expecting. Fees are typically around £55. You should also keep the following points in mind: 

  • If you took out an annual car insurance policy and paid for your cover upfront, any refund will be calculated on a pro-rata basis. Essentially, the more time remaining on your policy, the larger the refund you’ll likely receive. For example, cancelling after four months entitles you to a refund for the remaining eight months, minus any applicable cancellation or admin fees. However, if you cancel after 11 months, you’d only get one month’s refund, minus fees, so it’s less likely to be worth it
  • If you pay for your car insurance monthly, you might not get a refund, and you’ll still have to pay admin fees. In some cases, you might end up paying extra to cover the time you were insured
  • For optional insurance add-ons such as breakdown cover, refunds are generally not available through your insurer. Instead, you’ll need to contact the respective service providers to cancel these add-ons

Refunds from car insurance cancellations are typically processed within five to 10 business days, although this will depend on the insurer.

Is there a dispute process for car insurance cancellation costs?

There’s nothing to stop you from disputing car insurance cancellation costs, but you might not be successful. Before you go ahead, be sure to check your policy cancellation documents carefully so you know what cancellation fees apply.

If you feel you should be entitled to a larger refund or the fees are unfair, you should contact your provider first to discuss your concerns. Your provider should have a complaints procedure available on its website, and there might be a complaints form to complete. 

It’s important to keep a log of all your documentation for tracking purposes, including copies of emails and letters, with the dates of each correspondence. Doing this will help you remember the specifics of who you spoke to and what was discussed. It can also prove beneficial if you want to escalate your complaint to the Financial Ombudsman Service. You can do this if, after eight weeks, your insurer has not replied or you’re unhappy with the response.

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Can I cancel my car insurance if I pay monthly?

Yes, you can cancel your car insurance policy if you pay monthly. Again, the best way to do this is to ask your provider to cancel your policy. You’ll likely pay a cancellation fee, so make sure your provider has explained this to you.  

What you can’t do is simply cancel your car insurance direct debit and assume everything is sorted. Doing so would constitute a breach of contract, and it could show up on your credit report as a missed payment, which could negatively impact your credit score.

Frequently asked questions about cancelling car insurance

Yes, you can cancel your car insurance policy even if you’ve made a claim. However, receiving a refund is highly unlikely, especially if you paid for your policy upfront. Given the policy has already facilitated a payout, granting a refund wouldn’t be equitable to the insurer.

If you pay for your car insurance every month, you’ll usually be required to pay the outstanding amount in one lump sum. This also applies if you’ve written off your car. In this situation, it’s worth considering whether cancelling your policy is worth it, as it could be quite expensive.

There are several reasons why your insurance provider might choose to cancel your policy. It might be because you haven’t made insurance payments or have breached your policy conditions. It can also happen if you fail to declare penalty points on your licence or don’t inform your insurance provider about modifications to your car. 

If this happens, your car will no longer be insured, so you’ll need to arrange new cover quickly or declare your vehicle off the road with a SORN. Driving without insurance on UK roads is illegal, and if caught, you could face a fixed penalty of £300 plus six penalty points on your licence. You might also be disqualified from driving. 

When you apply for a new car insurance policy, it’s important to declare that your previous insurance provider cancelled your policy. This could make it harder to get cover elsewhere, but you need to be honest. If you’re struggling, you might need to approach a specialist provider. Be aware that your new policy is likely to be more expensive.

Yes, if you’re selling your car, you should cancel your car insurance, but only when the car is officially sold. If you don’t cancel your insurance policy when you’ve sold your vehicle and the new owner is involved in an accident, they could potentially make a claim on your insurance policy, bumping up the cost of your cover.

If you’re selling your current vehicle and buying a new one, it’s worth asking your insurance provider to transfer your existing car insurance policy to the new car. If this is possible, you might have to pay an admin fee and a higher car insurance premium, but once your insurance is up for renewal, you can shop around and find a better deal elsewhere.

Molly Dyson

Editor

After growing up with a passion for writing, Molly studied journalism and creative writing at university in her home country of the United States.

She has written for a variety of print and online publications, from small town newspapers to international magazines. Most of her 10-year career since relocating to the UK has been spent in business journalism, writing and editing for admin professionals at PA Life magazine and business travel managers at Business Travel News Europe and representing those titles at conferences around the world.

Now an Editor at the Independent Advisor, Molly is an expert in a broad range of consumer topics, that include solar panels and renewables, home improvements and home insurance, and consumer technology such as home security and VPNs.

In her free time, Molly can usually be found exploring the outdoors with her husband and their young son or gardening.