Are you being hit with sneaky car insurance fees? HALF of policies now charge for setting up, renewing or cancelling… here’s how to check yours
- These extra charges are levied when customers start, change or renew a policy
- Only 14% of policies charged fees in 2016, but that has now soared to 44%
- Ten per cent of policies charge set-up fees of more than £60
- We explain how to check the small print for any hidden charges
The hidden charges found in car insurance policies have soared in the last five years, with nearly half including a ‘set-up’ fee of as much as £60.
Some 44 per cent of policies now have a set-up fee, up from 14 per cent in 2016, according to the financial information service Defaqto.
The fees are charged by the insurer at the inception of a new policy, and will have impacted many drivers who have chosen to change their cars in recent times.
Car insurance fees have soared recently with nearly half of policies including a ‘set up’ fee
Whilst 86 per cent of people were not charged set-up fees in 2016, 10 per cent are now charged £60 or more.
However, it is not just those taking out a new policy that need to watch out for fees.
When motorists come to renew their car insurance, they may also be charged a ‘renewal fee’ within the price quoted if they stay with the same provider.
In 2016 just 9 per cent of products charged these fees, but recent analysis shows this has increased to 44 per cent of providers.
More than a quarter of insurers charge between £20 and £39.99 to renew a policy, while 8 per cent are charging £60 or more.
Those who decide to cancel their insurance policy within the legal 14-day ‘cooling off’ period may also be hit with fees.
| 2016 | 2021 | |
|---|---|---|
| No Fee Charged | 86% | 56% |
| Less than £20 | 2% | 1% |
| £20 – £39.99 | 6% | 25% |
| £40 – £59.99 | 2% | 8% |
| £60 or more | 4% | 10% |
| TOTAL | 100% | 100% |
| Source: Defaqto | ||
Some 51 per cent of products now charge a fee for cancelling within this period, which can be as much as £60 or even more.
Customers could also be charged adjustment fees if they need to alter their policy, for example by changing the name or adding a second driver.
Fees vary but they could be as high as £35, according to Which?, and this is on top of any increase in premiums caused by the changes.
| 2016 | 2021 | |
|---|---|---|
| No Fee Charged | 91% | 57% |
| Less than £20 | 1% | 1% |
| £20 – £39.99 | 6% | 26% |
| £40 – £59.99 | 2% | 8% |
| £60 or more | 0% | 8% |
| TOTAL | 100% | 100% |
| Source: Defaqto | ||
Mike Powell, car insurance expert at Defaqto, said: ‘With new taxes relating to emissions and rules on what you can and can’t drive, many people in the UK are buying new cars this year but could run the risk of being caught out with extra costs.
‘With the greater use of price comparison sites, often customers are looking for the cheapest deal and not reading the small print on fees.
‘It is worth taking your time when choosing a policy and find out exactly what you are going to be charged.
‘This will probably be the most time-consuming part of the purchasing process, but it could be the most important.’
| 2016 | 2021 | |
|---|---|---|
| Fee is ‘not stated’ | 3% | 0.50% |
| No Fee Charged | 47% | 48.50% |
| Less than £25 | 9% | 6% |
| £25 – £39.99 | 33% | 37% |
| £40 – £59.99 | 5% | 5% |
| £60 or more | 3% | 3% |
| TOTAL | 100% | 100% |
| Source: Defaqto |
Top tips from Defaqto to research policy fees when purchasing car insurance:
1. Typically insurance providers have a ‘Terms of Business’ document which will list all of the policy fees that are applicable. Make sure that you look for this document before purchasing cover.
2. If this document is not available, the information may be included within the policy document or on the insurance provider’s website. Look out for the policy fees to make sure you know what will be charged
3. If you cannot find the information, speak to an actual person and ask them to confirm the policy fees that are charged in writing, so you have a record.
The data was sourced from Defaqto’s Matrix Database on 6 December. It refers to standard, comprehensive car insurance products, excluding High Net Worth and Telematic products.