Insurance Premium Question

[MacRS200]

Hope someone can answer this one!

OK as some may know my Father-in-law wrote his car off a while back. Insurance have settled and paid up to the satisfaction of all.

He was paying monthly and cancelled the Direct Debit after the claim was settled as obviously he no longer needed cover.

So far so good.

Anyway, apparently his insurers are demanding payment of the remainder of the full annual premium. First off I thought "fair enough" and having thought a bit more about it I get to the point of, why pay for cover you don't need any more?

Anyone got a definitive answer to the question - does he have to pay or not?

Thanks

Neil

[DJ Wozza]

It depends on the small print Mac. Some Insurance companies actually cancel the cover if you have a fault claim,

but insist on you paying the premium in full (when on instalments) even though you don't get the full years cover.

[sparkystav]

Its because you've taken out a contract for a year. not just while you own the car.

Stav

[aaronabbott]

Its because you've taken out a contract for a year. not just while you own the car.

Stav

agree with stav,my cousin had the same problem an uninsured driver crashed into her and cut a long story short she was with sheilas wheels and they took the rest of the insurance premium 6x months at 102 quid out of the claim money and left her with hardly anything after they paid out luckly she got 1500 quid through her personal injury cover but thats not the point

[flotsam]

MY question is how much did they cough up?

I suspect the figures given by the car price guides such as glass's and Parkers are a rip-off. Do the car manufacturers and insurance companies not bribe them to downgrade the value of cars rapidly? Do you really lose thousands off a car after driving it off the forecourt.

The insurance companies don't supply new for old for cars. What they generally do is pay only the price in the car price guides. The only way you can win is buy a jallopy worth nothing but insured for a lot more.

[Fargo]

did a finance company pay his insurers the full premium with your father in law then paying the financier the monthly monies, is so then this is in effect a loan and not subject to, what it used to be, of no car so why pay insurance.

your better off perhaps to have your in law to change the insurance to 3rd party only onto some other car (even one that doesnt get driven ;), this way he will get a rebate on his fully comp (assuming he was full comp in the first place) which could be used to fund the remainder monthly 3rd party.

[Mike_B]

Of course he has to pay. You're not buying the insurance on a month by month basis, they are just allowing you to spread the cost of the premium over a period of time (usually charging a premium for the privilege).

If he had paid the full amount up front, would you be asking if he is entitled to a refund of x months because he no longer has the car?

[Mike_B]

MY question is how much did they cough up?

I suspect the figures given by the car price guides such as glass's and Parkers are a rip-off. Do the car manufacturers and insurance companies not bribe them to downgrade the value of cars rapidly? Do you really lose thousands off a car after driving it off the forecourt.

The insurance companies don't supply new for old for cars. What they generally do is pay only the price in the car price guides. The only way you can win is buy a jallopy worth nothing but insured for a lot more.

By your own reasoning, if the insurance companies only pay out the value of the car according to Parkers, how can you insure it for 'a lot more'? You could insure an old Mini for a million quid, but you sure as heck aren't going to get a million quid for it if you crash it.

And yes, you do lose thousands by driving it off the forecourt. Any item is only worth what somone is prepared to pay for it, and prices are set by the market not the guidebooks which is why some cars are worth more than Parker's set, and some worth less. Buy a secondhand car and depreciation is to your benefit, so it works both ways..

[maneesh]

To address the OP, it's all dependent on the contract. If the T&C of the insurance YOU signed up to state that the full premium must be paid, even if the car is written off, you are obliged to pay.

If a 3rd party was involved in the accident, and it was their fault, you could well seek the remainder of the premium as an uninsured loss from the other insurance company. This would be free to do if you have legal expenses cover, otherwise it would be costly to do.

Regarding the point about insuring the car for a set amount. When you are asked how much the car is worth when taking out cover, that is NOT the value you will get back if it's written off. I don't know what use that question is, but you will only get a specific amount back at write off if you get the insurance for an "agreed" value, which will mean a higher premium. Again, it's not available for every single policy.

The value assigned at write off is typically the book price or trade price. Insurance companies always try and fob you off with a lowish amount, and most people just allow this practice to continue. Parkers etc are not very accurate at all, if you feel the amount is too low, go look at autotrader and see how much it would REALLY cost to buy a car in similar condition to yours following the total loss. Send those examples back, and the insurer will probably send out an additional cheque to raise the offer.

I did that when the LS400 was written off, and got almost double what they originally offered me.

A warning to anyone taking out new insurance, don't just be tempted by the cheapest price - all policies are NOT equal. Read the T&Cs before handing over your money! Some (e.g Elephant) KEEP your premium even if you cancel the policy because you have sold the car.

[dave1]

It is standard practice with most insurers that any total loss payout ends the policy with no rebate even if the policy is only a few days old. If as you say, they are demanding payment of the balance, you can be fairly certain that the policy will have that condition somewhere in the print.

Whose fault was the incident and was there another person/vehicle involved?

[MacRS200]

Thanks to all for the replies.

Of course he has to pay. You're not buying the insurance on a month by month basis, they are just allowing you to spread the cost of the premium over a period of time (usually charging a premium for the privilege).

If he had paid the full amount up front, would you be asking if he is entitled to a refund of x months because he no longer has the car?

Not that simple Mike IMHO.

The premium for comprehensive insurance can cover many things, loss or damage to your vehicle, third party risks, legal cover, breakdown cover etc. So why should he be insuring against risks that no longer exists as he is not driving, the third party risk, for example, ended after the car was taken off the road.

Just because you are quoted for a years cover and you pay monthly does not mean that you have to maintain the cover for the whole year. Are you saying that if you sell your car the day after took out insurance that you would have pay the premium for the rest of the year?

And to answer your question yes I would be asking if he was entitled to a refund of x months. The purpose of insurance is covering risk, no risk, no premium.

[shake]

its a good question....

in my mind if i claimed 6months in and paid upfront for a year, i would settle and then ask for the rest of the 6months refund as i would not have a car. obviously if i purchased another car straight away and stayed with the insurance company i would not expect to pay for another policy as all that needs to be done is change the car on the system and pay a small price if the car costs more to insure, or refund is its cheaper to insure.

hmmm

EDIT:

just remembered my 1st ever claim, was 9 months in. i just had to pay £300 until the policy expired as the new car was more to insure.

[maneesh]

Thanks to all for the replies.

Of course he has to pay. You're not buying the insurance on a month by month basis, they are just allowing you to spread the cost of the premium over a period of time (usually charging a premium for the privilege).

If he had paid the full amount up front, would you be asking if he is entitled to a refund of x months because he no longer has the car?

Not that simple Mike IMHO.

Just because you are quoted for a years cover and you pay monthly does not mean that you have to maintain the cover for the whole year. Are you saying that if you sell your car the day after took out insurance that you would have pay the premium for the rest of the year?

Technically, you have a 14 day cooling off period after taking out the policy, in which you can cancel. However, a "reasonable" fee can be applied by the insurer if you do this. It could be 10 quid, it could be 50 quid, it could even be much more. There is no guideline amount set by the FSA.

Now if you you cancel the policy after the cooling off period (because you have sold your car), the refunding of the premium will be detailed in the cancellation section within the T&Cs of that particular policy with that particular insurer. Most insurers will reserve the right to apply an administration charge (varies) from the pro-rata amount to be refunded, whilst other insurers WILL NOT refund any money after cancellation.

"You have a statutory right under Financial Services Authority rules to cancel your policy within 14 after the later of the date of purchase of the contract or the day of which you receive your policy documentation." - FSA Rules.

I suggest we all read the small print in our policies this weekend, and post up on here so we can compare how insurers would treat you in the event of a write off/cancellation. Better to do that, than to speculate.

[Mike_B]

Thanks to all for the replies.

Of course he has to pay. You're not buying the insurance on a month by month basis, they are just allowing you to spread the cost of the premium over a period of time (usually charging a premium for the privilege).

If he had paid the full amount up front, would you be asking if he is entitled to a refund of x months because he no longer has the car?

Not that simple Mike IMHO.

The premium for comprehensive insurance can cover many things, loss or damage to your vehicle, third party risks, legal cover, breakdown cover etc. So why should he be insuring against risks that no longer exists as he is not driving, the third party risk, for example, ended after the car was taken off the road.

Just because you are quoted for a years cover and you pay monthly does not mean that you have to maintain the cover for the whole year. Are you saying that if you sell your car the day after took out insurance that you would have pay the premium for the rest of the year?

And to answer your question yes I would be asking if he was entitled to a refund of x months. The purpose of insurance is covering risk, no risk, no premium.

I think this is a question of semantics - whether you are paying a premium to provide cover against risk for a fixed period of 12 months, or a premium to provide cover against risk for a maximum period of 12 months or until the event of a full-loss claim. People tend to think of insurance as being the former, when in reality it is the latter. It's quite possible to purchase insurance using the first definition, but such companies will tend to charge more in premiums as they might, potentially, have to pay for a number of heavy accidents instead of just one. Insurance companies are effectively limiting the risk to themselves by doing this, and premiums are lower as a result.

However, spreading payments over the 12 month period is just a convenience - you still owe them the full amount no matter what stage of the term a claim is made.