Cancelling car insurance: the ultimate guide

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Car insurance cancellation fees
Cancelling pay monthly
How to cancel
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If your insurer cancels
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Cancelling your car insurance can be as a headache. We hate that - it should be quick and simple to cancel (or change) your insurance, so we've put together a guide on everything you need to know.

PS: if you want to know how to cancel your car insurance with the AA, Admiral, AXA, Churchill, Diamond, Direct Line, esure, Hastings, LV, More Than, the RAC and Tesco Bank, we've got dedicated guides for that, too. We'll link them later in the article. Hope it helps!

Car insurance cancellation fees

First, the bad news. If you cancel your car insurance early, your insurer will usually charge a fee. Car insurance cancellation fees are around £50 - although it depends on the company.

If you cancel within the first 14 days of your policy, though, the fee might be lower, or there might not be a fee at all. When you cancel, you'll get the rest of your premium refunded (although insurers usually don't refund the final two months).

So, if you've paid for a year of car insurance up front, and you've got six months left till it's time to renew, cancelling will mean you get refunded for four months of insurance.

You won't normally get a refund if you've made a claim on the policy. And you won't (usually) get a refund for any extras you pay for, like breakdown cover, if you've claimed on those.

(Is it too early for a quick plug? Cuvva never charges cancellation fees for our monthly car insurance policy. Just saying!)

Car insurance lapsing

Cancelling your car insurance isn't the same as not renewing your car insurance. That's called "lapsing". You don't have to pay a cancellation fee if you let your policy lapse. Just remember to let your insurer know you want to let your policy lapse if you're on an auto-renew policy.

Car insurance cooling-off periods

All car insurance policies have a minimum 14-day cooling-off period. This is the legal minimum, but some insurers will offer a longer one. If you want to cancel during the cooling-off period, you might not have to pay a cancellation fee.

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Cancelling your insurance when you pay monthly

Things can be a little different (and more expensive 😞) if you're paying monthly for an annual policy.

That's because most 'pay monthly' car insurance policies don't really work the way you might think. Rather than paying for one month's insurance at a time, think of it more like a loan. Your insurer covers you for a whole year, and then you pay it back in gradual instalments.

That's why, if you add up each monthly payment, the total cost will be higher than if you'd paid for the whole thing up front. It's a kind of interest, just like with any other loan.

We think this isn't right. That's why Cuvva's monthly insurance is different. The policy is rolling, meaning you can cancel at anytime - with no extra fees.

With most other insureres, however, things can get expensive when you try to cancel a pay-monthly policy. Cancellation fees will be based on the number of months remaining on your insurance policy - just like if you were paying it all up front. On top of all that, you'll usually have to pay an extra fee, which is a percentage of the total price of the policy.

FYI: Even if you're paying monthly via direct debit, you still have to let your insurer know that you want to cancel. If you cancel your direct debit without cancelling your policy, your insurer could cancel your policy for non-payment, and that could make it harder to get insurance in future.

Cancelling your insurance can be a pain but it could also save you money on your premium

How to cancel your car insurance

To cancel your car insurance, you'll need to:

  1. Check your policy documents to find out your cancellation fee
  2. Get in touch with your insurer - whether that's by phone, email, post or online
  3. Let them know you plan to cancel
  4. Confirm what fees you have to pay, and what refund you'll get
  5. SORN your car, if you need to (more on this later!)

You can cancel your policy before it starts (and it's usually free)

Car insurance doesn't have to start straight away. If you set your policy to start in the future, you'll be able to cancel before the policy starts. In this case, you usually won't have to pay a fee and you'll get a full refund.

This is different to the cooling-off period, which doesn't start until the policy starts. Most insurers have different definitions of the cooling-off period - but it never starts before your cover begins.

Insurance Premium Tax and cancellation fees

Insurance Premium Tax (or IPT) is basically the insurance industry equivalent of VAT. Some insurers include IPT in their cancellation fees, and some don't. If they do, they'll usually point this out in your policy documents.

At the moment, IPT is 12% (it can be higher for some types of car insurance, plus travel insurance).

Look in your policy documents to find your cancellation fees

A lot of insurance companies include their cancellation fees in your policy documents. This document can have a lot of different names: policy wording, policy booklet, or terms and conditions are all pretty common. There's usually a specific section on your cancellation rights.

Not all insurers charge a cancellation fee at all if you cancel during the cooling-off period (or before your policy even starts), but there's usually a fixed fee for cancelling outside of the cooling-off period. Even if you're not paying a cancellation fee, you'll still have to pay for the cover you've had.

Cancelling optional extras

If you have optional extras, like breakdown cover, they can be cancelled, too. And, like your car insurance policy, you might have to pay to cancel early.

You'll usually get a refund on your optional extras, minus a bit for the time you've been covered, and any cancellation fees you have to pay. But you won't get a refund if you've already used it.

Like car insurance, optional extras tend to renew automatically. So if you want to renew your car insurance, but not your breakdown cover, you'll need to make sure you let your insurer know.

Cancellation fees by insurer

We've crunched the numbers to find out just how much it'll cost you to cancel with some prominent insurers.

Want to cancel with the AA, Admiral, AXA, Churchill, Diamond, Direct Line, esure, Hastings, LV, More Than, the RAC or Tesco Bank? Simply click their name in our handy table below and you'll be taken to a dedicated guide explaining how to cancel your policy with them.

Name During cooling-off period Outside cooling-off period
AA £28 £58
Admiral £25 £55
Aviva £38 £38
Axa £0 £52.50
Churchill £0 £53
Diamond £25 £55
Direct Line £0 £48.16
esure £26 £60
Hastings £0 £45
LV £0 £40
More Than £25 £50
RAC £25 £55
Tesco £0 £40

What happens if your insurer cancels your insurance

There's a big difference between you cancelling your car insurance and your insurer cancelling it.

If you cancel, it doesn't usually affect getting insurance in the future. But if your insurer cancels, it's because they think you did something to break the rules.

Having a policy cancelled (or voided) by your insurer can make your insurance a lot more expensive further down the line. In some cases, it will mean you can't get covered at all.

We've written a guide about what it means if your insurer cancels. Check it out here 👇

Why insurers cancel policies (and what you can do about it) Learn more

How cancelling your policy affects your car insurance later on

With most car insurance policies, you'll probably lose your no-claims bonus for that year if you cancel your policy.

So if there's not long left on your policy, and depending on how big your no-claims bonus is likely to be, it might make more sense to hold off on cancelling. You don't usually get a refund for the last two months of the policy, anyway.

Other than that, cancelling your car insurance shouldn't make a difference when you try to buy a policy in the future.

If you're not getting another car insurance policy, you'd need to declare your car SORN

If you cancel your car insurance, but you're not getting rid of your car, you need to do one of these things:

SORNing your car

There's a car insurance law called Continuous Insurance Enforcement. (Or CIE, if you want to save a bit of typing.) CIE means your car has to be insured all the time. Not just when you're driving it.

The only time your car doesn't have to be insured is if you've "declared it off-road". To do that, you need to fill in a Statutory Off-Road Notification. This is how you tell the government you're not driving the car anymore.

If you tell the government your car is SORN, you won't be able to drive it again until you un-SORN it - unless you're driving it to an MOT.

Don't assume your insurance will be cancelled

Your car insurance doesn't get automatically cancelled, so you don't want to end up in a situatiton where you're paying for insurance you don't need. If your car's SORN, scrapped, sold or written off, your policy will still be running. Make sure you cancel insurance you don't need.

Save money on your car insurance bill for the things that really matter

Selling a car and cancelling your car insurance: when it makes sense to pay the cancellation fees

If you're not replacing the car

If you sell your car, and you decide not to replace it, you should cancel your car insurance straight away, and get as much of a refund as possible.

But if you've sold your car with just a month of two left on your policy, the cancellation fee could well be higher than the refund you'd get. So it's tempting to just let the policy lapse.

But, if you let the policy run, there's a chance the new owner could crash the car and try to claim on your insurance policy, which would technically still be running.

And that could cause a lot of headaches. Especially if your insurer cancels your policy because you didn't tell them you'd sold the car.

So, if you want to be on the safe side, it's always better to cancel if you're not replacing the car.

If you are replacing the car

If you replace the car, you don't have to pay the cancellation fee. Instead, you can switch your current policy over to your new car. There might be an admin fee for doing this.

And when you change your car, it could change the price of your car insurance. So if you're upgrading, you might end up with a higher premium after you switch.

Even with the admin fee, it's usually cheaper to switch over your insurance rather than cancelling it and buying a new policy.

But this isn't always the case.

It's worth doing the maths and making sure before you go ahead and switch your insurance to the new vehicle.

Cancelling your car insurance if your car gets stolen

If your car gets stolen, you should let your insurer know.

It will go down on your record as a loss, which isn't great. But the alternative is worse.

Stolen cars are much more likely to be crashed. And if there is a crash, the person who stole it could try to claim on your insurance, which would technically still be running.

They (probably) wouldn't be successful, but it would mean your insurer could cancel your insurance policy.

Cancelling temporary car insurance

Temporary car insurance works a bit differently to a full policy.

Because it's short-term, you don't get a cooling-off period. And you usually won't get a refund if you want to cancel.

If you want to cancel a Cuvva temporary car insurance policy, you'll need to get in touch with us - but we won't be able to give you a refund.

Cancelling your insurance may affect your no-claims bonus

Insurance companies award your no-claims bonus for each full year of claim-free driving you have. If you cancel your policy early (or switch), you won't earn any no-claims bonus.

You'll be able to keep any no-claims bonus you built up in previous years, if you haven't made a claim.

For example, if you built up 3 years no-claims bonus and cancelled your new policy after 4 months (having not made a claim), you'd still have your 3 years.

Insurers usually include proof of your no-claims in your cancellation notice.

If you can't find it, get in touch with your insurer for a copy.

Your proof of no claims is usually only valid for two years After this time you'll lose the bonus and have to start again at 0.

There's usually a time limit for sending your no claims bonus proof to a new insurer Read more

Get fairer car insurance

Want to try a new kind of car insurance? Cuvva has you sorted.

From hourly car insurance policies to rolling monthly subscriptions (with no nasty cancellation fees!), Cuvva has a policy that suits everyone.

Whatever you're after, getting a quote only takes a few minutes. We can also cover you for insuring a van temporarily or if you need learner driver insurance. Happy driving!

Sources:

Our Smart Pricing subscription could save good drivers up to 1/3 on their premium. Check it out.
Updated on 11th May 2022