Changing or cancelling a car insurance policy costs - learn about adjustment and cancellation fees, duplicate document charges, cooling-off periods and your rights.
If you’ve compared prices and found yourself a great car insurance deal, you might think that’s job done for the year.
However, sometimes the unforeseen and the inevitable happen - you change jobs, you move house, you upgrade your car or you sell it - and you’ll need to let your insurer know to avoid invalidating your policy.
But did you know that altering your car insurance mid-term can sometimes prove a costly business?
In July 2014, Which? unveiled research† showing that - of 28 insurers it studied between 2011 and 2014 - 13 had raised fees in that time and eight had introduced new ones.
It also discovered that cancellation fees had gone up by almost a fifth in the three-year period.
Which? said that a quarter of those who paid insurance admin fees didn’t expect them and only one in three felt that fees were made clear before they bought the policy.
If you think you’ll need to change or cancel your car insurance part-way through, it’s a good idea to make sure you know what fees might apply from the outset so you can factor them into your decision.
You may well find that you need to make changes to your policy details during the term of your car insurance. These changes might include:
Although you might feel that some changes should lead to a reduction in your premiums - such as moving to a more secure area or switching to a lower-power vehicle - in many cases making changes will still lead to an increase in what you pay.
This is because insurers often apply an adjustment fee for any changes made – and this fee can sometimes be quite significant.
On 3 June, 2015, Gocompare.com checked 225 comprehensive car insurance policies listed on the matrix of independent financial researcher Defaqto and found that 71% charged an adjustment fee.
Of the policies that applied a fee for changes, 19% charged between £10 and £14.99, 23% between £15 and £19.99 and 56% charged a fee of £20 or greater. Only one policy charged less than £10 to make a change.
Sometimes you can save on adjustment fees by making changes to your policy online - after all, these charges are intended to cover the cost of administration, so if you’re performing the administration yourself there shouldn’t be a fee.
However, although the majority of policies (63%) could be purchased online, only 32% of these allowed the customer to make changes for themselves online.
What’s more, even if you can make the changes yourself online, it might still cost you - 76% of policies that could be changed online listed adjustment fees of £20 or more.
However, some providers only charge these fees if you call up to make changes - for some changes it’s free to make them yourself online.
You’re entitled to cancel your insurance if you no longer need it - for instance, if you sell your car - and you should receive a pro-rata refund for the time remaining on the policy.
However, in some cases this refund can be very small or non-existent due to cancellation fees deducted from it.
Policy set-up fees on car insurance policies are fairly rare - of the 225 policies checked on Defaqto in June 2015, just 10% charged one.
Yet 75% charged a cancellation fee and for 44% of those that did charge a fee, it was greater than £50. Just 2% of those that levied a fee charged less than £20.
Some insurers also have a minimum amount that they’ll refund, so if your pro-rata refund minus the cancellation fee falls below the minimum refund amount, the insurer simply retains the refund.
Retained cancellation refunds were only applied to 8% of the policies checked on Defaqto and it was less than £20 in most cases.
However, one policy retained cancellation refunds below £35.
If your policy documents are lost or damaged, you might have to pay a fee to get a replacement from your insurer.
Giving consumers the right to cancel - and then penalising them excessively for exercising that right - is likely to be unenforceable in law, as well as unfair and unreasonable
Of the 225 polices checked on Defaqto, 54% charged no fee for issuing duplicate documents.
For the policies that did charge a duplicate document fee, the sum could be significant, with 26% of them charging £20 or more.
Less than a third of policies with duplicate document fees charged under £10.
However, with the rise of electronic documents, paying fees to get a copy of your paperwork is becoming rarer - if your documents have been sent to you by email, you can simply print yourself another copy.
Out of the 225 policies checked, 41% issued an electronic certificate of insurance. Of these policies, 54% would also send out a paper document on request without charge, but the rest charged fees for this service which ranged from £1.99 to £30.
By law, all insurance policies have a minimum 14-day cooling-off period, during which you can cancel the policy for any reason.
If you cancel, you should get a refund of any premiums you’ve paid, but the insurer is allowed to charge to cover days when the policy was in force, plus an administration fee.
Just 11% of the policies checked offered a cooling-off period of 14 days or more with a full refund of premiums and no admin fee.
It’s far more common for insurers to either charge for the days used or to charge an admin fee, with 44% of policies having a 14- or 15-day cooling-off period subject to either a pro-rata refund or an admin fee.
Almost half (45%) of the policies checked charged pro-rata for the days insured and levied an admin fee on top.
Of the policies that had a cooling-off period cancellation fee, only 2% charged less than £15 and 17% charged £30 or more.
The highest cancellation fee charged during the cooling-off period was £75 and the policies which charged this also only offered a pro-rata refund for the time insured.
The Financial Ombudsman† says that: “Giving consumers the right to cancel - and then penalising them excessively for exercising that right - is likely to be unenforceable in law, as well as unfair and unreasonable.
“In cases referred to us, if a customer has cancelled a policy and received a significantly smaller refund of premiums than could be expected as a pro-rata settlement, we will ask the firm to explain how its approach complies with the requirements under the regulations.”
So if you do feel you’ve been charged fees that are disproportionately high, complain to the insurer in the first instance - you may find that it reduces or waives the fees, particularly if it means keeping your custom.
You might also have grounds for complaint if the fees weren’t declared before you took out the policy.
If you’re still unhappy eight weeks after first complaining to the insurer, may be able to take your complaint to the Financial Ombudsman.