Insurance auto-renewal – is it legal?

We’re encouraged to shop around for insurance and not to stay loyal to the same company. However, if you have insurance it will probably automatically renew unless you opt out. Find out what you can do if this has happened. 

Insurance auto-renewal – what is it?

Auto-renewal means that your insurance policy is automatically renewed at the end of the 12-month contract. If you don’t want to renew your insurance contract with your existing insurer, you have to contact them and let them know.

Auto-renewal used to be confined to car insurance, but these days insurers use it for policies such as pet insurance, home insurance and even car breakdown recovery.

Although the process of automatically renewing insurance was designed to retain customers, there was some logic behind car insurance being automatically renewed. That’s because it’s illegal to drive a car without insurance. However, it’s not illegal to have home contents or a pet that’s not insured, although if you have a mortgage, you must have building insurance.

Insurance auto-renewal – is it legal?

It is legal for an insurance company to automatically renew your insurance policy but only if they have told you that they will do this. Some insurance companies give you the option of ticking a box to say that you would like the insurance to renew automatically.

Others have a policy of automatically renewing insurance. If they do have this policy, the insurance company must tell you clearly that this is what they’re going to do. They can’t just bury this in the terms and conditions.

The insurance company must also contact you 30 days before your insurance is due to end and tell you that they will renew the contract unless you tell them not to. If you don’t receive this notification, you should be able to cancel your insurance without paying a charge.

How common is insurance auto-renewal?

When you take out an insurance policy, for your car, home, pet or certain travel insurance policies, it’s often a 12-month contract. However, an increasing number of insurance companies use auto-renewal. This means that unless you tell them not to, the company will renew your insurance policy. If your insurance is automatically renewed without you having been told beforehand and you don’t want to stay with the same company, here are the steps to take:
  • Contact your insurer and say you want to cancel.  Insurers generally charge a cancellation fee, but you shouldn’t have to pay this if you weren’t told about the auto-renewal clause.

  • If you’re charged a cancellation fee and the insurer won’t refund it, you should complain to them by letter or email.

  • If they still won’t refund money you’ve paid, complain to the Financial Ombudsman Service here. You can do this free of charge. They can investigate your complaint and, if they agree with you, may state that the insurer should refund you and/or pay (limited) compensation.

Do you automatically renew your insurance every year or do you always shop around to see if you could do better elsewhere? We’d be interested in hearing from you. You can get in touch at [email protected] or post a comment below.

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2 thoughts on “Insurance auto-renewal – is it legal?

  1. Avatar
    Paul Latham on Reply

    I always shop around, and cancel the old policy by phone. This is usually met with a sales pitch, but accepted.

    This year I cannot get through on the phone, I suspect some companies are hiding behind corona virus/staff reductions. What should I do ?

  2. Avatar
    Sophie on Reply

    I got divorced and bought a house and had to get all the insurances etc sorted out. I let Barclays (my bank) do that for me. After 2 years, I read Martin’s money tips about insurance, and found that I could get my house insured for a year for the same price that Barclays charged in 2 months. I have NEVER since let me insurance auto renew, always check. It is sometimes cheapest to stay, but I always check.. 🙂

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