Continuous insurance and auto renewal
Continuous insurance and the automatic renewal trap
Car insurance is already a legal requirement but the law which arrived in 2011 means you can’t afford to let your cover lapse. You must have insurance in place from the day your existing policy ends. You can reinsure with your existing insurer but there is a good chance this is not be the cheapest option. Your existing insurer should send a renewal quote a month before your policy ends giving you plenty of time to shop around and find the right cover at the best price.
What you must do is act quickly if you do not intend to stay with the same insurer, the reason being the auto-renewal trap.
The auto-renewal trap
Many insurance policies contain an automatic renewal clause, which dictates that your policy will be automatically ‘rolled-over’ to another year if you don’t give notice within a certain period, usually four weeks.
It’s important to check the small print of any policy. Your provider should be in touch in ‘good time’ before your current deal expires, to act as a reminder and to offer you the chance to decline or negotiate your premium. ‘Good time’ is generally around 21 days before renewal but could be longer. If you do not act immediately the time will drift by and your policy will be automatically renewed.
So make sure you are on the ball four weeks before the renewal. Check for quotations and decide quickly if you are going to renew. If you are not going to renew your insurance get the message over to the insurer properly. Is a phone call to a call centre enough? We suggest a call followed by a good old-fashioned letter will do the trick; and do keep a copy.
Not getting the cancellation right can mean your existing policy will be renewed, and to escape it you may have to pay a cancellation charge.
Have you a leg to stand on?
Customers have a 14-day ‘cooling off’ period following the start of a new policy or renewal of an existing one, during which time they are legally entitled to cancel it. If you realise the error within this period, then you should be able to cancel your policy, although you may incur some pro-rata costs for the time and reasonable administration charges. Your insurance provider’s exact terms should be set out in the policy document.
Once you have passed that 14-day period some insurance providers will charge for cancellation. The insurer can only do what the agreement between you allows, so you may still be entitled to get your money back.
If you feel you haven’t been treated fairly, then be sure to write a letter of complaint to your insurer. Your provider should deal with any formal complaints within eight weeks. If you are not satisfied with the response – or if they haven’t given one at all – you’ll then be able to refer it at no cost to the Financial Ombudsman Service (FOS), who can act as an arbitrator.
If the FOS does find in your favour, not only will you be exempt from paying any cancellation fees, but you should also be able to claim back any additional costs incurred as a result of the error, such as premiums that may have been withdrawn automatically from your account.
It might still be cheaper to cancel
Even if your claim is unsuccessful, you don’t necessarily have to sit tight and accept a far more expensive premium than you could get elsewhere. Cancellation fees can range between £20 and £50, but this can vary greatly depending on the provider.
If you can find a better deal that still saves you money, then it may well be worth sacrificing a fee in order to get a cheaper deal overall.
You can avoid having to complain by getting your act together early, and giving proper notice if you do not want your insurance automatically renewed.
There is a useful explanation of continuous insurance by the Motor Insurers’ Bureau.