Why can cancelling my policy make my insurer suspicious?
Cancelling an insurance policy is not a decision to be taken lightly, and there can be some serious consequences to consider. You may have good reason to do so; you may have sold your car, or scrapped it; and then again you may have giving up driving completely, perhaps because of ill health. However, it is not unknown for a minority of dishonest people to take out insurance just to get a car taxed; they then cancel the policy, and continue to drive without insurance. Leaving aside the fact that they will almost certainly get caught (the police have a huge arsenal of high tech gadgets that help them recognise uninsured drivers) the insurers might have no way of knowing that you are tarred by this same brush; and whilst this may be completely unfair, they are perfectly entitled to bear this possibility in mind.
Will I get my money back?
As a policyholder, you possess the legal right to cancel your car insurance policy within a legally binding 14-day cooling-off period, which begins either on the policy's commencement or when you receive policy documents, whichever is later, if you have changed your mind about it. The insurer is obliged to reimburse you for any paid premiums; although they may deduct a nominal amount to account for the time during which the policy was active (and they are allowed to impose a small administrative fee).
Outside of this cooling off period everything depends on the terms and conditions that you agreed to when the policy was set up (you did read these, didn't you?). Some insurers are more generous than others, but there are those that will offer you little back in return (and these can often be smaller insurers that offer cheaper premiums; they have to make a profit somehow).
What happens if I opted for monthly payments?
This is where things can get quite complex and it is an area that produces a lot of disputes. Some people think that they can simply stop making monthly payments as soon as they cancel the policy; but in most cases you will have agreed to make them for the agreed term. So, if you cancel after the cooling off period you could still be liable for those payments; and often not to the actual insurer, but to a finance company that works with the insurer. You could find yourself facing a civil claim, with the subsequent damage to your credit rating, in that eventuality. The insurer could still, of course, reinburse part of the premium but this would depend on your agreement; yet another reason for making sure you know what you are in for, before taking a policy out.
What if I still go ahead and cancel?
OK; let's say you've decided to go ahead with the cancellation. You'll need to contact your insurance company and let them know that you want to cancel your policy. Ask them to confirm this cancellation in writing. Depending on the terms of your policy, you may, as we have said, be entitled to a partial refund of your premium, but you'll likely be charged an administration fee. Plus, if you cancel mid-way through your policy, you may not get anything back, even though you are no longer on cover.
Another important thing to consider is that cancelling your policy can have long-term effects on your future insurance premiums. If you do so without having another policy in place, it could be seen as a red flag by future insurers and it could lead to higher premiums; or even difficulty finding an insurer willing to take you on. It's important to weigh up the cost of your current policy against the potential cost of future premiums before making any hasty decisions.
So, to sum up; cancelling your UK car insurance policy is something you really need to think carefully about. It can leave you liable for damages and injuries in the event of an accident, result in additional fees, and even impact your future insurance premiums. Before cancelling, and if you plan to continue driving, you must always make sure that you have cover in place with another insurer; there is no such thing as an insurance 'period of grace'.
