Car insurance: Renewing your car insurance
Car insurance renewals can be a money spinner. Saving their best rates for new customers, many providers quote more at renewal knowing that policyholders could sleepwalk into a second year without shopping around.
But how does car insurance renewal work? And how can you avoid paying over the odds?
What is auto-renewal and how does it work?
Almost all car insurance policies have an auto-renewal clause. The clause allows an insurer to roll your cover over to a second year unless you tell them not to.
Your insurer will provide you with a notice of renewal before you're signed up for another year. This is usually sent by post, outlining the full details of your new policy and the premium. The document will also explain how you can cancel and how long you have to change your mind. Most companies give you at least 21 days to leave before your policy is automatically renewed.
Am I charged a fee for renewal?
Administration fees for renewals are not very commonplace but there are some companies that charge them. If you pay for your insurance on a monthly basis, Kwik-Fit will charge you £35 to arrange your policy whether you're a new customer or if you're at renewal. Hastings Direct currently charges £20 if you renew your policy, while 1st Central levies a fee of £50.
What is a pre-renewal deposit?
Some providers – notably Swinton – automatically take a deposit from you ahead of renewal in attempt to secure your business for another year.
The payment, usually one month’s premium, only applies to pay monthly customers and is taken from your account a month before renewal. The amount is deducted from next year’s premium if you decide to stay on.
If you know you're coming up for renewal, check with your provider for pre-renewal deposits to avoid being caught off guard when money starts disappearing from your account.
Can I cancel if my policy rolls over without me wanting it to?
You can cancel your policy but it will come at a cost. You'll have a 14-day cooling-off period once your policy has started and most insurers will let you cancel within this period by only paying for the cover you have used. However, some companies will still charge a fee if you decide you want out during this period.
The situation can be a bit trickier if you are past the 14-day cooling-off period. At this point, a cancellation fee will almost certainly apply and could be as high as £75 (but is routinely around £50).
Don’t let this deter you from cancelling your policy, however. If you can find cover that is more than £50 cheaper than you currently have, you can still save by ditching your current insurer and switching to another one.
What is the best way to find a cheap alternative?
When you are around 11 months into your existing policy, this it the time to start looking for a new policy. A good starting point is price comparison sites. Once you have found a good price, you could either take out a new policy or use it as leverage to haggle down the premium quoted by your current provider.
Find out more: Haggling for better car insurance deals
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