Car insurance: Are you being hit with hidden charges?

7 min Read Published: 15 Dec 2021

car insurance hidden feesMotorists are facing a surge in “hidden fees” from car insurance providers, driving up their premiums to the tune of hundreds of pounds every year. In this article, we list the charges to look out for on your policy, how the costs have been changing, and how to find out if you are paying any on your car insurance.

Hidden fees

Research by Defaqto found that “hidden fees”, often mentioned only briefly in the small print, have become increasingly common in recent years. The average driver now pays an extra £124 on top of their existing bill due to additional fees tucked away in the small print, according to data from insurance company Cuvva.

Now that price comparison sites are so popular, it can be tempting to go straight for the cheapest deal without reading the small print, but doing so could saddle you with fees that were not included in the initial quote. It is well worth taking the time to research a policy thoroughly to find out exactly what you are going to be charged, as it is not always clear upfront. Though it can be time-consuming, you could save yourself hundreds of pounds.

Below is a list of common “hidden fees” that you could find in your car insurance policy. Be sure to thoroughly check the small print to make sure you know exactly what you are paying at any given time.

Set-up fees

44% of policies now include a set-up fee, having increased from just 14% in 2016. The average cost of a set-up fee is around £60, but some 10% of customers will have to pay more than this.

Set up fee

2016 2021
No fee 86% 56%
<£20 2% 1%
£20 - £39.99 6% 25%
£40 - £59.99 2% 8%
>£60 4% 10%

Source: Defaqto

Renewal fees

Over 44% of car insurance policies now come with renewal fees, which can be as high as £40, compared with just 9% in 2016. 8% of policies charge over £60. Most of the cheapest providers in the UK do not charge renewal fees.

Renewal fee 2016 2021
No fee 91% 57%
<£20 1% 1%
£20 - £39.99 6% 26%
£40 - £59.99 2% 8%
>£60 0% 8%

Source: Defaqto

Cancellation fees

51% of policies also charge a fee up to £60 or more for cancelling within the legal 14-day “cooling off” period.

Cancellation fee 2016 2021
Fee is 'not stated' 3% 0.50%
No fee 47% 48.50%
<£25 9% 6%
£25 - £39.99 33% 37%
£40 - £59.99 5% 5%
>£60 3% 3%

Source: Defaqto

Adjustment fees

Motorists could also be charged an adjustment fee if they need to alter their car insurance policy, such as to add a second driver. These fees can be as high as £35.

Pay monthly rates

Not a “hidden fee” per se, but drivers that pay for car insurance every month are likely to be charged more, usually between 15% and 35% APR, costing an extra £133 each year on average.

How to find the best car insurance for you

Fortunately, we have rounded up some top tips on how to find the best car insurance policy for you, from “hidden” fees to the best comparison sites.

1. Double-check comparison site quotes

Although comparison sites can be a fantastic way to compare the best deals on the market, they can sometimes be misleading, especially when it comes to identifying any “hidden” charges you could find yourself paying for at a later date. Make sure you cross-check the information for any policies you are considering purchasing so you don’t find yourself saddled with any nasty surprises.

2. Read the ‘Terms of Business’

To find what “hidden” fees a policy could include, you need to read the small print. Usually, car insurance providers have a 'Terms of Business' document which will list all of the fees that are applicable to your chosen policy. Make sure that you look at this document thoroughly before purchasing cover to avoid paying for any unexpected charges. If you cannot find a ‘Terms of Business’ document, you might still find the information you need on the insurance provider's own website. Check the “Terms & Conditions” and FAQs carefully.

3. Speak to a member of staff

Still struggling to find the information? Try contacting the provider directly so you can speak to a real person and ask them to confirm the policy fees that are charged in writing. Keep this so that you have a written record of what you have been told.

4. Shop around for a better deal

If you come across a policy with more fees than you would like, try shopping around for an alternative with fewer additional charges. Many of the most popular car insurance providers, such as More Than and Tesco Bank, have minimal “hidden” fees. Sites such as CompareTheMarket and MoneySuperMarket* can help you find a better deal - just make sure the quotes are accurate.

More on car insurance

For more information and advice on car insurance, check out the following articles:

 

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