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A couple of months ago I was in a no fault accident that wrote my car off, I contacted my insurance company and told them about the accident. I was assured that as long as it wasn't my fault my no claims or premium wouldn't be affected. I was made to feel like claiming for the damage was the right thing to do.

In the end the car was written off as it was deemed not worth repairing and I was awarded a £200 payout.

When I then attempted to cancel the insurance I was told I couldn't yet as the claim had not been closed by the underwriter. I left it for a month and continued to pay my premium. Today I was in touch with them again to close the policy and was told I would need to pay a full £600 as I have been paying monthly and would need to pay for the remainder of the year. Is this legal?

(At no point during the process was I told that this would be the case, the whole time I was made to feel like I was doing the right thing and I now very much feel like I have been conned into giving them more money. I would have been far better off to scrap the car myself, get scrap value and have just canceled the insurance!)

  • can we ask what insurance company it is? – Putvi May 16 at 22:19
  • Just ignore their demands for payment, if they send a letter demanding payment just reply with a final letter, explaining your reasons for choosing not to pay. It is probably not going to be worth their time to pursue the matter any further. – Shazamo Morebucks May 16 at 22:44
  • @ShazamoMorebucks that is terrible advice with very bad real world repercussions. It would damage the OPs credit, and £600 could easily get them pursued by debt collectors and on the receiving end of a County Court Judgement. – user4210 May 20 at 17:15
  • @moo what else can he do? He's denied the claim but the insurance company isn't willing to budge. Either he convince them to cancel the debt or they file a claim, after which he will contest it. This is all assuming they are erroneously charging him this amount of course. A copy of the insurance policy would help us provide a clearer answer. – Shazamo Morebucks May 21 at 20:59
  • @ShazamoMorebucks he owes the money, simple as. He literally doesn't have a leg to stand on in this case - he took out a policy, he made a claim, he accepted the insurance payout (he never denied the claim - he said that if he knew then he wouldnt have made the claim, and thats a weak argument) and as such he needs to pay the policy premium in full. If he stops payment, hes in default, and that has serious repercussions, hence why the advice to simply stop payment is terrible advice, as there is plenty of negative consequences that can happen with little cost to the insurance company. – user4210 May 21 at 22:55
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You have to pay the premium

You are not buying insurance by the month - you are buying coverage for a year for which you making monthly payments.

At law, your insurer has to pay out for a single claim that happens during that period - most insurance policies contain a reset clause that reinstates the cover after a claim but this only applies if the asset still exists. Insurance law started with insurance of wooden ships on intercontinental voyages where losses were usually total and this ‘accident of history’ informs modern insurance where losses are usually not total. Similarly, being able to cancel the insurance if you dispose of the asset is a creature of the contract and usual practice rather than a legal requirement.

As for “mak[ing] it clear to me” - they did. It’s in the policy which you legally read and understood even if you didn’t actually read it.

  • This is true sometimes, but some policies let you cancel them. – Putvi May 16 at 21:30
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    Interesting. For contrast I'll note: In the U.S. every insurance policy I have seen can be cancelled regardless of claim history for a pro-rated refund of premium. But in the U.S. insurance is a heavily regulated industry.. – feetwet May 17 at 14:43
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    @feetwet insurance is heavily regulated everywhere but not always in the same way. Are you sure what you see is a regulatory requirement and not just commercial practice. For example, in Australia there is no legal right to a refund if you change your mind but all major retailers give them without question as a matter of commercial necessity. It’s so common that many Australians think it’s a legal right. – Dale M May 17 at 21:09
  • In the cases I know it is effectively "required by regulators" because the state regulator demands that it approve the terms of all consumer insurance policies sold in its state. I don't know if a regulator would approve a policy that does not provide for a refund of unused premium. But in the U.S. this is in stark contrast to retailers who generally limit the terms of refunds. So much so that many Americans are astonished to learn that they are entitled to pro-rated premium even if the insurer has already paid out claims on a policy. – feetwet May 17 at 23:19
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Every insurance company has different policies, so you would have to look at the contract you signed with them and establish what cancellation fees they may have.

The law in the UK gives you a 14 day period to cancel insurance after getting it, but after that you are bound by the contract you signed with the company. https://www.confused.com/car-insurance/guides/how-to-cancel-your-car-insurance

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When you ask an insurance company to give you a quotation for insurance, you are asking for two things:

  1. Them to cover you and your property on a risk basis (the risk being different depending on whether you choose comprehensive or third party only, or any other option, and depending on your specific circumstances as driver) for having one or more claimable events at any point in the insured period

  2. That cover to be valid for a fixed period of time

When you agree to take out that cover on the basis of the quotation, the cost required to be paid is the cost for covering the risk of one or more claimable events at any point during the policies life time - whether it be at the start of the policy, or at the end.

You can either pay for the insurance in full, up front, or you can pay for the insurance in monthly instalments - note that paying for the insurance in monthly instalments DOES NOT make the insurance policy a monthly term, you have taken the equivalent of a payment plan for the entire cost of the policy and you need to pay that.

If you feel that you have been miss-sold the insurance on the basis that this was not explained to you (and having worked in the UK consumer insurance industry, you are going to have a hard time proving that - consumer insurance plans are pretty tied down in terms of the legal side of selling it), then you can raise a complaint to that effect firstly with the insurance company involved, and then with the Financial Ombudsman, and ultimately you could pursue your claim through the small claims court.

  • Technically its up to a fixed period of time in some cases. – Putvi May 16 at 21:32
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    @Putvi if you've asked for a quotation for a year, the policy is in effect for a year and you have to pay the full years premium. If you asked for a 6 month policy, the policy is in effect for six months, and thats the premium you have to pay. Paying monthly for a full years premium does not make that policy a monthly policy. Etc etc etc. Can you show any exceptions to this? – user4210 May 16 at 21:35
  • I'm not saying there's a specific law regarding canceling it at a certain time, but plenty of policies let you cancel early. confused.com/car-insurance/guides/… – Putvi May 16 at 21:37
  • @Putvi Im not disputing that, but the costs involved in cancelling the policy are very different depending on whether you have made a claim or not. The cost of making the claim is precisely what you have been quoted for when you took out the policy - so no, you wont get away with paying a single months instalment of a £1000 policy if your car is written off in the first month, as the cost of covering that claim is based on the full premium and not a single instalment. comparethemarket.com/car-insurance/content/cancellation-fees – user4210 May 16 at 21:40
  • Yes, I agree there can be fees, but that does not mean it can't be done. – Putvi May 16 at 21:41

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