Most car insurance policies renew automatically after 12 months. And after the first year, it’s usually more expensive.
Auto-renewal can be convenient, because it means you don’t have a mad rush to sort out a new policy before it runs out.
But it also means you might have to pay a lot more than you would if you switched.
You should get an auto-renewal letter or email from your insurer around 21 to 30 days before your policy expires. In that letter or email, they’ll tell you your policy is about to expire, so you’ve got time to go and get a new one if you want to. This is called your “auto-renewal window”.
They’ll also tell you:
If you don’t do anything, your policy will auto-renew as soon as it runs out, leaving you covered as before.
Most of the time, your insurance will get more expensive after the first year. Sometimes much more expensive. And that’s because of something called dual pricing.
Dual pricing is when an insurer offers you a really low price for the first year, in the hope that you won’t notice when it auto-renews at a much higher price.
This price change happens even if you haven’t made any claims or changed your details. And that’s because the first year was a discounted price, and then it goes up a more expensive, “normal” price.
If you don’t want to stick with your insurer, you can opt out of auto-renewal at any time. Just get in touch with them and tell them you don’t want to auto-renew when your policy runs out.
Some insurance companies will ask if you want to opt in or opt out of auto-renewal when you take out your policy, but most of the time you’re automatically opted in.
If your policy is up for renewal and you decide to switch providers, make sure you tell your insurer during the auto-renewal window. (You might have to give them a call to do it).
Letting your policy run out is called “lapsing”. It’s different to cancelling your car insurance early. It won’t affect your no-claims bonus, and you won’t have to pay a fee to do it.
While most insurers auto-renew, some don’t, so it’s best to double check your policy. If it doesn’t renew, you’ll end up without any insurance. So make sure there’s no gap between your current policy ending and your new one starting.
Once your policy has renewed, you start a new “cooling-off period”. That means you get 14 days to change your mind.
But even if you cancel during the cooling off period, you might still have to pay a small fee. And on top of that, you’ll get charged for the days you’ve been covered.
If you cancel after the 14-day cooling off period, you’ll have to pay a cancellation fee, and this can be a lot more.
Even if you pay monthly for your car insurance, you’ll still get a letter about auto-renewing, and your price will still (usually) go up at the end of the year.
That’s because, even if you pay monthly, you’re still getting a full annual policy - you’re just paying it off in instalments. (And usually with a big interest rate.)
If you don’t want to renew a pay-monthly policy, you’ll still need to tell your insurer. You can’t just cancel your direct debit. If you do that, your insurer will probably cancel your policy for non-payment.
And if your insurer cancels your policy, you could run into trouble when you try to buy insurance later on.
If you have any optional extras with your policy – like breakdown cover – these usually auto-renew at the same time as your policy. (And probably at a higher price too.)
It’s best to read your policy and auto-renewal letter carefully so you know exactly what’s going to auto-renew, and for how much.
Auto-renewal tends to leave you with the same level of cover you had before, unless you specifically opt out of any optional extras.
Your compulsory car insurance excess can also go up when you renew your policy.
If you’ve made a claim during the year, your insurance company might see you as higher risk when your policy comes up for renewal. This means they could increase your compulsory excess.
Even if you haven’t claimed, some insurers may want to increase your compulsory excess anyway. Again, best to check those auto-renewal docs carefully.
Insurers work out how much you pay based on the information you give them. This helps them work out how “risky” you are.
For most changes, you need to update your insurer right away. But some things, like changing your gender, don’t affect the price of insurance so you can tell them when it’s time to renew.
If you’re not sure, it’s safest to just update your insurer as soon as any of your details change.
If you’re worried about losing your no claims bonus – don’t be. You take your no claims bonus with you when you switch providers, so don’t let that stop you.
That’s because not renewing your policy isn’t the same as cancelling it. When you cancel your policy mid-way through, you’ll lose the no-claims bonus you’ve built up over the course of that year, but letting your policy lapse is fine.
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Updated on 23rd December 2020