Cancelling car insurance: the ultimate guide

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Car insurance cancellation fees
Fees by insurer
How to cancel
If your insurer cancels
How cancelling affects you in future

If you cancel your car insurance early, your insurer will usually charge a fee.

Car insurance cancellation fees are around £50.

If you cancel within the first 14 days, 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 (minus another charge for the time you've been insured).

This is about how car insurance cancellation fees usually work. But we don’t think the way they usually work is fair.

That’s why we’re building a new, pay-monthly car insurance that you can cancel any time without having to pay a fee.

When do you pay car insurance cancellation fees?

If you want to cancel your car insurance, you need to get in touch with your insurer. That usually means a phone call, although some will let you do it online.

When you cancel your car insurance, you’ll have to pay a fee. But you’ll also get a refund for the months you haven’t yet used up. Except for the last two months of the policy. Insurers won’t usually refund this.

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, minus any cancellation fees.

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.

Cancelling your car insurance isn’t the same as not renewing your car insurance. That’s called “lapsing”, and there’s a big difference between the two.

You don’t have to pay a cancellation fee if you let your policy lapse. You just have to let your insurer know you want to let your policy lapse - if it’s set up to auto-renew.

The cooling-off period

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 14-day cooling-off period, you might not have to pay a cancellation fee.

Cancelling your insurance when you pay monthly

You can also cancel your car insurance if you pay monthly. But you’ll usually end up paying even more in fees.

That’s because most pay monthly car insurance policies don’t really work the way they seem to work. It doesn’t mean you pay 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.

That all sounds a bit pedantic. But it’s important to understand it when you want to cancel a car insurance that you pay for month-to-month.

Because, when you cancel, the cancellation fees will be based on the number of months you have left on your insurance policy - just like it would if you’re paying for the whole thing up front. So you’ll have to pay the same cancellation fee you would if you didn’t pay for your car insurance month-to-month.

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.

(Again, this isn’t how our pay-monthly car insurance works. It’s not a loan. That’s why you don’t have to pay any fees to cancel.)

And you still have to let your insurer know that you want to cancel. Cancelling your direct debit won’t cancel your car insurance.

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.

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 £40 £40
More Than £25 £50
RAC £25 £55
Tesco £0 £40

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, and confirm what fees you have to pay, and what refund you’ll get
  4. SORN your car, if you need to

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.

If you cancel before the policy starts, you usually won’t have to pay a fee. And because you haven’t been covered, you’ll get a full refund.

Your cooling-off period doesn’t start until the policy starts.

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% (20% for travel insurance and some kinds of car 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.

And most insurance companies will have different policies depending on whether you’re not in your cooling-off period.

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.

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 your insurance later on.

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.

How cancelling your policy affects your car insurance later on

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

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, and just let it run out instead. 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, and 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.

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.

Check your policy docs to find out what the cancellation fees are. (It’s usually a separate document to your main insurance docs).

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.

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.

Bear in mind that you’ll lose your no-claims bonus if you cancel your car insurance, so take that into account when you’re deciding whether to cancel or switch. Having a no-claims bonus can make a big difference to the price of your car insurance later on.

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.)


RAC: Car insurance help

More Than: Charges and fees

Diamond: Your agreement (PDF)

AXA: Policy wording (PDF)

AA: Car insurance policy documents (PDF)

esure: Administration fees

LV: Cancellation charges (PDF)


Aviva: Motor insurance policy (PDF)

Tesco: How do I cancel my car insurance policy?

Hastings: Our fees

Direct Line: Terms and conditions

Admiral: Your agreements and fees

Updated on 9th December 2019

Cuvva is authorised and regulated by the UK Financial Conduct Authority. (#690273)