Can I get a refund on my car insurance if I’m not driving?

Linda J. Dodson

Motor insurers will save as much as £1bn from the fall in car use and insurance claims brought about by the Covid-19 epidemic and are being urged to share the savings with their hard-pressed customers by cutting premiums.

While insurers have offered “payment holidays”, policyholders who take up the offer must still pay the money back eventually, with the arrears added to future premiums or paid in one lump sum.

The big insurance companies stand to gain hundreds of millions of pounds as drivers continue to pay their premiums even though they are using their vehicles less than ever. With fewer cars on the road and fewer journeys being made, insurers are paying out far less in claims than normal.

Transport use has fallen by almost two thirds since February, according to the latest official figures, following government guidance to make only essential journeys.

Drivers whose cars are sitting in garages or on driveways will be wondering whether they should simply cancel their cover altogether to save money. But cancelling midway through a policy is likely to result in hefty penalties, diluting the prospect of any saving. Missing payments or cancelling direct debits without informing your insurer first can affect your credit score.

James Blackham, of By Miles, an insurer that charges according to how much a vehicle is used, has called on its rivals to reduce premiums, following the lead of some large American firms that have already offered rebates.

“This situation is benefiting only car insurers, which stand to make more than £1bn from this reduction in claims,” he said. “If you’re not using your car as much as usual during this health crisis, it’s only fair that you should pay less for your car insurance.”

Younger drivers, who pay on average more than £1,500 a year for their car cover, according to GoCompare, a comparison service, would be left particularly out of pocket, he said.

Car cover costs more than £470 a year on average.

Churchill, the insurer, warned that those who found themselves in a financial difficulty should not cancel their direct debits payments. This could have an adverse impact on their policy and their future credit score.

Instead, the firm asked policyholders to call and speak to it about the options that would be best suited to them. It charges almost £50 if you want to cancel your policy before it expires.

Admiral said it would offer payment holidays on a case-by-case basis, but any deferred payments would have to be repaid by the end of the policy term. It charges £55 if you want to cancel.

Both Axa and the AA said they were reviewing payment holidays on a case-by-case basis. Axa charges £52.50 and the AA £30 for cancellation midway through a policy.

Aviva said it was offering deferrals to anyone currently unable to work or on furlough leave, as well as free breakdown cover and other benefits to NHS workers. Customers will have to pay £38 if they wish to cancel cover.

Saga, the over-50s insurer, charges £50 for early cancellation and said it was reviewing cases individually if customers asked to defer their premiums.

LV= charges a £40 cancellation fee, but did not respond when questioned about payment holidays.

All insurers said taking an arranged break from payments would not be taken into account when premiums were calculated in future and would not make customers more expensive to insure.

The Association of British Insurers, a trade body, said firms would continue to review the situation for customers with short-term financial problems as a result of Covid-19.

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