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. 

What is insurance auto-renewal?

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.

Is automatic insurance renewal 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.

Can I cancel auto renewed insurance?

The short answer is yes, but you need to do it within 14 days of it renewing or you could face penalty charges. All insurance products are regulated by the Financial Conduct Authority (FCA) and as such they are subject to a 14 day ‘cooling off’ period during which you are free to cancel the product without any penalties (this rises to 30 days for life insurance products). To cancel your policy you should contact your insurer as soon as possible after you are notified of the auto-renewal.

If you have gone past the 14 day ‘cooling off’ period, you should still be able to cancel, but your insurer is likely to charge you a fee for doing so. Again, contact your provider and let them know that you want to cancel and they can let you know the next steps.

Cancelling auto renewed insurance products is likely to get easier in January 2022 as the FCA are bringing in new rules to give insurance product consumers easier methods of cancelling the automatic renewal of their policy as well as making pricing fairer for loyal customers.

If your insurance renewal is coming up soon, you can compare car insurance quotes or home insurance quotes today to see if you can find a more competitive quote than the one your current provider is offering. If your insurance isn’t up for renewal just yet, let us know your renewal month here and we can send you a reminder nearer the time. For a limited time, if you buy your car insurance policy via Rest Less, you’ll receive a free £20 Amazon voucher*. Terms and conditions apply.

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 join the money conversation on the Rest Less community or leave a comment below.

Links with an * by them are affiliate links which help Rest Less stay free to use as they can result in a payment or benefit to us. You can read more on how we make money here.

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If your insurance is coming up for renewal, it’s well worth checking the market for a better deal. It only takes a few minutes but could save you £100s a year, so why not check what deals are available now?

If your deal isn’t expiring soon, make sure you don’t forget – set up your free reminders here.

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