What Happens If I Pay annualy for my car insurance, then sell or scrap my car?

Boagirl

As it says on the tin really

I am with Aviva, usually pay monthly but I would rather get it out the way and pay it all upfront, plus it brings the car insurance down a bit too.

But What Happens If I Pay annually, so pay £500 for the year upfront for my car insurance, then sell or scrap my car in that year?

If a few months down the line my car does a dodo on me, and I scrap or sell it, to get a new car...

Do I get the remainder of my money returned to me? For example if I have paid for 12 months but am only 4 months in ?

Or would they refuse to refund it, and instead offset it against the cost of insuring the new car?

Usually this would not bother me, but I don't want to have to stay with aviva if I get a new car and it is cheaper to insure with someone else I don't want to lose out on hundreds of pounds

macman

You will get a pro-rata refund, minus a cancellation/admin fee. Your policy t&c's will tell you how much.

Iceweasel

You generally will only get a pro-rata refund if you have been with them over a year - i.e. it's an annual policy which has been renewed at least once. (makes no difference if you pay monthly or not)

But if you've been with them for under a year then they will consider your example of 4 months cover as being a short term policy - so make a re-calculation of the rates - and may not refund anything like what you would get on a pro-rata calculation.

It's been known for someone to change insurer - so are starting a new policy - then on cancellation after a few months get near to nothing as a refund. Trying to re-instate the policy gave more head-aches and more charges.

Rather than cancelling the policy it might be better to 'suspend' it.

That way the policy lies dormant while you haven't got a vehicle insured, and you'll get a pro-rata refund when you next put a car back on the policy.

Ask Aviva these questions in advance before possibly making an expensive mistake.

oscarward

If you're getting another car ask for the policy to be amended to the new vehicle. You can ask for it to be suspended if there is a gap between old and new car. That way you get a full years NCD added, whereas if you cancel and start anew then you don't.

You will have to pay an amendment fee and any difference in premium pro-rata.

e.g. son swapped Hyundai i10 1.1 for i20 1.2 with 2 months left on the policy and got a £9 refund. That was with Aviva too.

Some insurers won't insurer the new vehicle so you have to cancel and start anew with another insurer, but you don't know until you ask.

FlameCloud

Iceweasel wrote: »

You generally will only get a pro-rata refund if you have been with them over a year - i.e. it's an annual policy which has been renewed at least once. (makes no difference if you pay monthly or not)

But if you've been with them for under a year then they will consider your example of 4 months cover as being a short term policy - so make a re-calculation of the rates - and may not refund anything like what you would get on a pro-rata calculation.

The FOS thinks only a Pro-rata refund is fair (assuming that it is a normal car policy).

motorguy

Boagirl wrote: »

As it says on the tin really

I am with Aviva, usually pay monthly but I would rather get it out the way and pay it all upfront, plus it brings the car insurance down a bit too.

Just for clarification, you dont pay for your insurance monthly, you pay the premium off via a loan over the course of the year.

cyclonebri1

It's not pro rata, first of all a "time on risk" comes in to play, ie, you could insure then write off the next day, that's why cover costs.

Pro rata after that means no premium on surrender after about 8/9 months from my experience, so best to leave it running for an extra years NCB

But the actual question is simple, if you scrap the car you transfer the insurance to the next 1, you may incur an increase or decrease in premium plus an admin charge for the changes,(barstewards). So in effect your insurance can up or down.

cyclonebri1

There is another issue that I too would like clarification on.

Something that many folks don't understand is this;

If you write of your car, ie, it's your fault, and happens the day after you pay your annual premium, your policy becomes paid up.
You get your car value back but the next day you have to pay a new policy fee, you have to renew as your policy is fully paid out for the present premium year.


But what happens if this does occur the day after a monthly payment policy is issued?

dacouch

cyclonebri1 wrote: »

There is another issue that I too would like clarification on.

Something that many folks don't understand is this;

If you write of your car, ie, it's your fault, and happens the day after you pay your annual premium, your policy becomes paid up.
You get your car value back but the next day you have to pay a new policy fee, you have to renew as your policy is fully paid out for the present premium year.


But what happens if this does occur the day after a monthly payment policy is issued?

They generally deduct the remaining instalments from the claims payment.

The Ombudsman now "expects" an Insurer to offer cover for any replacement vehicle following a write off rather than cancelling cover (Assuming the Insurer would normally offer cover).

"17. outstanding premium instalments or premium refunds

Most motor insurance policies are yearly contracts – so the full premium is payable even if the vehicle is written off during the year. If the consumer paid the yearly premium upfront, they will not receive any refund. Or if the consumer was paying the yearly premium by monthly instalments, they must still pay the outstanding instalments after the vehicle is written off.

When an insurer declares a vehicle a write-off, we expect it to offer a consumer the option of bringing a replacement vehicle onto the insurance policy so that the remainder of the policy term can be used. Depending on the make and model of the replacement vehicle, an additional premium may be required by the insurer. This should be calculated on a pro rata basis for the remainder of the policy term."

http://www.financial-ombudsman.org.uk/publications/technical_notes/motor-valuation.html

Mobeer

cyclonebri1 wrote: »

But what happens if this does occur the day after a monthly payment policy is issued?

As MotorGuy said above, monthly payment schemes are just a way of paying for an annual insurance policy in instalments. You still have to pay the monthly payments for the annual policy.

cyclonebri1

Cheers, that's clear, I was thinking that maybe the increase in total payable by monthly installments covered the risk of the loss.
I guess now that's just the loss of interest on the whole fee.