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Can I get a car insurance refund?

Can I get a car insurance refund?
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Wondering when you might be entitled to a refund on your car insurance and how much you can get? Here are the answers to these and other questions you might have about car insurance refunds.

Can I get a refund on my car insurance?

Generally, you might be entitled to a car insurance refund if you cancel your car insurance policy mid-term or if there are changes to your situation, such as driving significantly less because of the coronavirus pandemic

Cancelling your policy

There are several reasons why you might need to cancel your insurance policy. Perhaps you’ve sold your vehicle. Maybe you want to declare your car off the road and no longer need insurance for it. Or you could have simply found a better insurance deal elsewhere.

Whether you can actually get a refund after cancelling your insurance will depend on whether:

  • Your cover has started already
  • You are within a cooling-off period
  • You have already made any claims

Cancelling during your 14-day cooling-off period

All insurance products typically have a 14-day cooling-off period. If you happen to cancel within this period, you are entitled to a refund minus a charge for the time you’ve been insured.

However, you might be charged an admin or cancellation fee, so read the terms and conditions of your policy carefully.

Cancelling outside your 14-day cooling-off period

You might still be able to get a refund if you cancel outside the 14-day cooling-off period. While the exact refund practices vary from one insurer to another, many typically don’t refund the final two months of your policy.

That means that if you’ve paid your yearly premium up front and then cancel your policy after six months, you’ll probably only get four months of refunds back, minus the admin fee. 

Can I get a car insurance refund I pay monthly?

If you pay by monthly instalments, then you’ll probably not get any refund. Although paying monthly effectively means that you are paying for the insurance as you use it, your insurer won’t see it that way.

You will be charged a cancellation fee that’s based on the number of months left on your policy. On top of that, you’ll have to pay an extra fee, usually a percentage of the total price of your policy.

What if I’ve already made a claim?

If you’ve already made a claim and want to cancel your insurance afterwards, you’re not entitled to any refund. In fact, you’ll have to pay the rest of your policy off, usually in one lump sum.

Car insurance refunds during the pandemic

The coronavirus pandemic has significantly changed the way people use their cars. For example, if you are working from home, you might not be using your vehicle to travel to and from work. Your total mileage might be less than normal for the year.

If that’s the case, then it might be a good idea to call your insurer and inform them that your situation has changed. They might agree to reduce your annual premium and possibly give you a refund.

Keep in mind that there are no guarantees, however. Out of the big insurers in the UK, only Admiral and LV have proactively offered their customers refunds.

Back in April, Admiral gave an automatic £25 refund for each car insured with the company.

LV set aside £30 million for a refund scheme. But unlike Admiral, the refunds are not automatic and customers have to prove that they have suffered financially because of coronavirus to get a refund. This scheme is still ongoing and if you are eligible, you might be able to get between £20 to £50 as a refund.

Other big firms have not put in place any clear plans for refunds. However, some, such as Direct Line, have said that they would consider refunds for customers in certain circumstances.

The good news is that the Financial Conduct Authority (FCA) has set new rules that require insurers to do what they can to help customers during these tough times. Under these rules, some insurers are offering their customers the option to reduce their cover temporarily or defer their payments. Some have also waived their admin or cancellation fees.

However, keep in mind that no blanket changes have been applied. So you’ll have to check with your insurance company to discuss what your options are.

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