Why you still have to pay insurance if your car’s written off
WHEN 78-year- old Ray Henry came down from his flat one Sunday morning in May to find a massive dent running along the side of his beloved Volvo, he feared the worst.
The other driver hadn’t left a note and Ray’s insurer, Post Office Money, confirmed the cost of repairing the 20-year-old car would be higher than its value.
After two strokes in 10 years, his health deteriorating and only a modest pension to rely on, the former military policeman and antiques dealer reluctantly concluded it was time to give up driving.
He received a £100 payout from Post Office Money for the write-off and thought that was that.
Yet even though he no longer had a car — and wouldn’t be getting a new one — Ray was told he would have to keep paying insurance premiums of £109 a month until the following May.
He was told this was because he’d made a claim on the policy, which he’d taken out just a few days before, so it couldn’t be cancelled. It meant that getting a measly £100 payout for his old Volvo would end up costing him almost £1,145.
Ray, from North London, had no idea he’d fallen into a common trap contained in the terms and conditions of car insurance policies. Most insurers impose a rule that means you cannot cancel your policy halfway through the year if you’ve already made a claim.
As a result, you don’t get a refund if you pay annually. If you pay monthly, as Ray did, you must keep up the instalments until the policy renewal date.
By contrast, if you haven’t claimed on a motor policy, any unused premiums for the rest of the year are typically refunded or waived, minus a cancellation fee, which would have been £55 in Ray’s case.
Ray says he was not aware of this when he bought the policy, nor when he claimed for the massive dent in May.
Research for Money Mail found that 24 of the 25 top car insurers impose similar policy cancellation rules to Post Office Money.
According to information service Defaqto, only Aviva offers to refund or waive unused premiums for the rest of the year. However, it deducts a £42.56 fee if you cancel.
To Ray, it seemed like he was being penalised for doing the right thing.
He was due to get a mobility scooter for local errands from the council, which he felt would be much safer at his age. In any case, he didn’t have the spare cash to buy and run a new vehicle. On top of that, the accident wasn’t his fault and, as Post Office Money acknowledged, he was within his rights to claim for the damages to the car he owned and now wouldn’t be able to sell. ‘The scrape was the final straw really in terms of continuing driving,’ Ray says. ‘It was a tough decision because I loved driving and the freedom it gave me, but I felt it was the responsible thing to do.
‘I kept arguing that it wasn’t fair to make me keep paying for my insurance because I wasn’t using it and had been given such a small payout.
‘But the people at Post Office Money told me I had to pay because it was in the terms and conditions. It was like talking to a robot. Clearly, if I’d have known about this catch before I claimed, I’d have just accepted the loss on the chin.’
Ray grudgingly paid the premiums until September as he tried to reason with Post Office Money. But it refused to budge and he cancelled his direct debit, asking his bank to claw back all payments since the accident. He then began to receive intimidating letters from Post Office Money about debt collectors.
After Money Mail contacted Post Office Money it agreed to stop chasing Ray for the rest of the year’s premiums.
A spokeswoman for Post Office Money says: ‘ Given the individual circumstances — including the low value of the claim and the short policy period — we have waived Mr Henry’s outstanding balance.
‘ We are very sorry for any confusion, worry or distress our customer has suffered. We are reviewing our correspondence in relation to this scenario to make sure it is clearer for customers in the future.
‘ We would like to apologise to Mr Henry and are grateful to Money Mail for bringing this to our attention.’ Brian Brown, head of insurance insight at Defaqto, says: ‘Almost every insurer in the UK will charge the full premium if you try to cancel your policy after a motor claim. ‘ This includes those policies where you pay monthly, and stopping any direct debit could also have a negative impact on your credit ratings, so think very carefully before doing this.’
Ray says: ‘It was amazing how the insurer’s tone changed after Money Mail got involved. The next day I had a call and they were grovelling on the phone.’