How to get a car insurance refund

September 30, 2022 by

Looking to get a refund from car insurance after selling your car? Here’s how…

If you’re cancelling your car insurance with time remaining, you can expect to be refunded for any time remaining on the policy that you’ve paid for.

Wondering how to claim that, and how much you’re entitled to? Read through this guide.

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Can I cancel car insurance?

Simply put, yes you can cancel your car insurance.

Whether you should or not depends on the circumstances.

If you’re selling your car, you should cancel your insurance as soon as it’s sold so you’re not paying to cover a car you don’t own — but don’t do this before the car leaves your ownership and you’ve received the money for it.

Oh, and if you want a hassle-free way to sell your car, selling through carwow is easy and convenient without any haggling.

If you’re keeping your car but not driving it on the road and declaring it as ‘SORN’ with the Driver and Vehicle Licensing Agency so you don’t need to pay road tax, you don’t legally have to insure the car, but it is wise to do so anyway to guard against damage and theft. You can get specialist SORN insurance to do this.

Can I get a refund on my car insurance?

The most common reason for cancelling a car insurance policy is because a car has been sold, and if, as is likely, you are mid-way through the policy, you will be entitled to a refund.

How much of a refund you will be due on how long is remaining on the policy, and the policy terms and conditions.

Most insurers will provide a breakdown of their refund policy in the original documents when you signed with them. Firms may require you to call their helpline to cancel a policy rather than being able to do so online, and will explain their cancellation policy with you when you speak to them.

Most firms charge an administration fee for cancelling insurance, with £50 not being atypical, or £150 if you have a telematics black box installed as part of your car insurance policy.

While almost all insurers will allow you to cancel a policy mid-term, they are also are legally obliged to provide a 14-day cooling off period, during which time they must allow you to cancel. They can still charge an administration fee for cancelling within this timeframe, but you may find this is less (perhaps £25) during the cooling off period.
Do note that any insurance add-ons you paid for (EG courtesy car cover, legal cover, replacement key cover) may not be refundable.

Who is eligible for a car insurance refund?

Car insurance policies should provide a refund facility to anyone who takes out cover, though each comes with lengthy terms and conditions. Some insurers may also not refund the final two months of a policy, for example.

You choose to cancel

You should be entitled to cancel your insurance policy because you’ve sold the car, for example.

How much of a refund you’ll be eligible for depends on a number of factors, including the time remaining on your policy and the conditions set by the insurer.

You made a policy change

If you make a change to your car insurance policy to cut down the costs — for example you’ve switched to a different car which is less expensive to insure — you could be entitled to a refund.

Again this depends on how long is remaining on your policy and the terms set out by the insurer. It’s worth a call to ask.

Insurer cancels policy

Insurers can cancel your policy if you’re found to have broken the terms of the agreement. In this case, you could be entitled to a refund but the amount will depend on the time remaining and terms set out by the insurer. You will also have to declare that you have had insurance cancelled on you whenever you take out a new policy in the future.

How to check your car insurance status

Your car’s insurance status is available on the Motor Insurance Database. You’re able to see whether it is insured by entering its registration into the search box.

How to get a car insurance refund

Getting a refund is usually as simple as calling your insurer, stating your reason for cancellation and waiting for any refund you may be entitled to. You shouldn’t have to provide any paperwork, and the process often only takes a couple of minutes.

How long the refund will take to come through will vary between insurers, but five to 10 working days is not unusual.

FAQ: Car insurance refunds

Can you get a refund on unused car insurance?

You can, though the amount you’re entitled to will vary on the time remaining and your insurer’s policies.

Can I cancel my car insurance if I pay monthly?

You’re able to cancel your car insurance regardless of how you pay it.

Can you cancel car insurance at any time?

You can cancel your car insurance at any time, though the amount you’re refunded will vary depending on the time remaining and your insurer’s policies.

Can I keep my insurance if I sell my car?

You can keep your car insurance if you sell it, but you’ll be paying for someone else’s car at that point. It’s worth the phone call to cancel to avoid unnecessary costs to yourself.

Do you have to pay to cancel car insurance?

You may be charged administration fees to cancel your car insurance, which will vary in cost depending on your insurer.

Does SORN cancel insurance?

Declaring your car SORN will not cancel your insurance, and it’s advisable to keep a SORN car insured just in case something does happen to it.

Do I have to cancel my car insurance if I scrap my car?

You don’t have to cancel your car insurance if you scrap a car, but you’ll be needlessly paying for a policy if you don’t.

What is the cooling-off period?

A cooling-off period is the time companies must offer you to return goods or cancel a service if you have purchased them through distance selling, for example online or over the phone. The cooling-off period is legally set at 14 days, and starts the moment you enter into an insurance contract.

How do I know what my car insurance status is?

You can check your car’s status on the Motor Insurance Database.

Can I get a car insurance refund if I’m covering less mileage?

Not necessarily, though some firms do offer this option. Direct Line’s Mileage MoneyBack service, for example, will refund you 2% of the cost of your policy for every 1,000 miles under your annual estimate, up to a maximum of 20% of the cost of the policy.

Can a car insurance company cancel my policy?

Yes, and although this is rare, it is not a good thing. Insurers may cancel a policy if you choose to pay monthly and have failed to keep up repayments. They may also cancel if they think your application was fraudulent, or if you fail to tell them if you modify your car, for example. Note that if you have a policy cancelled on you, you are required to tell future insurers about this, which could make cover more expensive or harder to come by. And unlike speeding convictions which expire after a period of time, insurers ask if you have ‘ever’ had a policy cancelled on you.

Can I get a refund if I change my car for one that’s cheaper to insure?

Potentially yes, though this will vary depending on how much cheaper the car is to insure, how far through the policy you are, and what admin fees are charged. If the car you have changed to is £100 a year less, you only have two months left on your policy and there is a £25 admin fee, you may find you do not receive any refund.

It’s also worth flagging that insurers often offer attractive rates for new rather than established customers, so consider using a price comparison site to see if you could save more money by taking out a new policy rather than changing your old one (which you may then want to cancel).