There are several reasons why you might want to cancel your household insurance policy. Maybe you’ve only just taken out the policy, and have had second thoughts. Or perhaps you’ve just searched the market for a better deal, and discovered how much you can save by switching. Or you might be selling your home, or moving abroad. So what can you do about it?
Cool to cancel
If you have only just taken out your home insurance policy, cancelling is pretty straightforward. By law, you have a 14-day “cooling-off” period, during which time you can cancel the policy without quibble or question. This period starts either from the day your insurance policy kicks in or when you receive your policy documents, whichever is later. You probably won’t get every single penny of your money back, but you should get most of it.
You should receive a refund of any insurance premiums you have already handed over, minus a proportionate payment to cover the handful of days when the policy was in force. This will also apply to any add-on policies you took out at the same time. Your insurer may also charge you a set-up fee, typically around £15. If you’re thinking of cancelling your contract, you should get in touch with your insurer as soon as possible, to avoid exceeding the 14-day limit.
Remember that you don't need to cancel and start a new policy if you only plan to change your details, most insurers will even adjust your premium if you move house.
Not so cool
Things get a little more complicated if you cancel your home insurance after the cooling-off period, but prior to your renewal date. In part, it depends on the insurer. Most will give you a pro-rata refund, provided you haven’t made any claims during the policy year. So if you cancel after six months, your insurer should return half of your annual premium, minus charges. Most will charge you an administration fee, typically between £35 and £50. The amount should be set out in your policy document. If you received a discount on your premiums at the time you took the policy, your insurer is likely to cancel that, and deduct the amount from your refund. It may hit you with other deductions, such as a policy renewal service charge, or any credit-card handling charges.
If you are cancelling your policy to take advantage of a cheaper home insurance deal elsewhere, these charges could wipe out your savings. It may be simpler, easier and cheaper to wait until renewal before hunting down a better deal. In a bid to pick up business from their rivals, a number of household insurers will pay up to £50 towards any cancellation fee that you have to pay to your existing insurer. If you’re really keen to switch, look out for one of these deals.
Keep yourself covered
Before doing anything, you need to check your policy booklet and speak to your insurer. Whatever you do, don’t simply cancel your direct debit, because that doesn’t cancel your insurance policy. As far as your insurer is concerned, your policy is still in force, and you still owe them your monthly premiums. It may withhold documents, such as confirmation of your no-claims bonus, until you make full payment.
In most cases, you will need to cancel your policy in writing, setting out the date you want the policy to stop. Don’t forget to cancel your direct debit as well. You must have a new policy in place before cancelling your previous one, so there are no gaps between coverage. Otherwise you risk disaster if your home suffers theft, loss or damage while between policies. If you have a mortgage, buildings insurance is mandatory.
The ideal time to shop around for a better deal on your insurance is on your annual renewal date. The drawback with having auto-renewal on your home insurance policy is that you could easily miss this annual window, when you can cancel your policy free of charge and fuss. If you want to shop around every year for a better deal on your home insurance, make sure you know when your policy comes up for renewal.