Cancelling Your Car Insurance

There are proper procedures to ensure correct and efficient cancellation of your car insurance. Cancellation is defined as the termination of a policy before the date on which it is due to expire. It is important to note that in accordance with the Road Traffic Act 1988 your certificate of motor insurance must be returned to your insurer upon the cancellation or surrender of your policy. Only once they have received your certificate (or you have provided a signed, written statement that it has been lost or destroyed) can your policy be cancelled.

When you take out a car insurance policy, it will have (by law) a fourteen day cooling-off period. This gives you the chance to reconsider whether or not this policy is right for you and whether or not it fulfils your insurance needs. During this time you can cancel the policy. You will be charged for the period of time you have been insured, but you may be entitled to a refund of the premiums which cover the period after the date of cancellation; for example, if you had already paid the full annual premium, you would be entitled to a partial refund of this. If you made a claim within the cooling off period, your insurer may refuse a refund.

If you wish to cancel at any time after the 14 day cooling-off period, the following procedure will usually apply.

Your insurer usually calculates any refund based on the short-term premium rates in force at the time. Short-Term Premium Rates (STPR) are commonplace throughout the car insurance industry. They protect insurers from financial losses if you fail to keep the insurance contract until it expires. If you are insured for six months rather than twelve, your insurer is likely to charge you a higher monthly rate. These short-term premium rates may also apply to temporary policy amendments.

An administration charge may apply if a policy is cancelled before the end of the term. This charge will be detailed in your policy document, and can be an unlimited percentage of your premium. If you have earned a No Claims Discount, you will receive a document to prove this so that it can be transferred to a new policy. Simply cancelling a direct debit will not cancel your insurance. You must inform your provider and follow the correct procedure to ensure that you do not incur any unnecessary costs.

Insurance Provider Cancellation
Once a policy is in force, the insurance provider must honour it except in specific legal circumstances, such as if you submitted a fraudulent application. However, your insurer has the right to cancel a policy by giving seven days written notice. If this is the case they must refund any premium paid, minus the cost of insuring you while the policy was in force. For example, if you had paid the full annual premium of £500, but they decided to cancel your policy after just six months, you may be entitled to £250 refund. The certificate of insurance must be returned to your insurer in accordance with UK Law.