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'My car's been written off, so why am I still paying for the insurance?'
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Bill deals with a range of areas, from staying safe from scams to insurance, benefits, care and equity release. He is passionate about improving people's financial wellbeing.
My car was written off just one month after I took out my car insurance policy, which I pay for monthly.
So why is the insurer insisting I pay for the remaining 11 months?
A Which? Money member
'Insurance paid monthly is effectively a 12-month loan'
Bill Wilkinson-Hoy, Which? money expert, says…
This is standard practice, particularly when car insurance monthly premiums are involved.
If your car has suffered a lot of damage or requires repairs that almost outweigh the value of the car, it won’t be repairable and will be deemed a total loss or write-off. Once the claim is settled, the policy usually ends.
However, from the point of view of the insurer, you still paid for a year of car insurance, by borrowing the upfront annual payment, to be repaid over 12 months. A total loss claim doesn’t cancel this debt.
Paying monthly for car insurance doesn’t buy you flexibility
Usually, the money you owe would be deducted from the claim, rather than you needing to repay it directly.
It’s a reminder that paying monthly for car insurance doesn’t buy you flexibility. Nor is it always the best way to spread costs, as you’re often charged interest, in some cases above 30% (our car insurance reviews include how much each charges).
You could try paying annually on an interest-free purchase credit card, then repay it over 12 months.
- Find out more: How to find cheap car insurance
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