Insurance cancellation query

robodonkey

Recently I started a policy with company X, and was happily insured and paying by DD until I sold my bike after a short 3 months. I've a baby on the way so needed the cash to buy a car, usual story.

Now I've been sent a letter looking for a reasonably large final payment which I can't understand.

Hopefully someone here can explain better than the Insurer's explanation.

So some facts followed by the Insurers calculations.

(1) Policy quote was (in total, including fees and setup costs and interest for annual setup): 648.05

(2) Policy states 50 Euro cancellation fee

(3) I paid initial 1st payment and 3 payments as follows:
€89.21 deposit
+ €22.90 September installment (changed bike on policy so insurance premium changed)
+ €59.55 October installment

By my calculations I've paid €171.66 to-date for a policy of ~€650 (all charges embedded)

(4) Assuming I paid the cancellation fee of 50 on top of already paid DDs, my total paid would be 264.53 for 3 months insurance, in my view the correct amount (or at least a sensible amount).

(5) I recieved a demand for an additional €214.53 (see calculations below from Insurer)

(6) Assuming the Insurers demands are correct I'll end up paying €171.66 + €214.53 That's 386.19 for 3 months insurance :eek:


Insurers Info:

Cost of policy: €534.93 premium + €40.00 fee + €25.00 legal
= €599.93

+ €48.12 Interest charged for year

= €648.05 payable in total for years insurance

- €268.36 return premium if the policy was paid off all at once

+ €45 cancellation fee

-€38.50 refund of interest for 8 payments

= €386.19 time on cover charge

-€171.66 total paid (€89.21 deposit + €22.90 September installment + €59.55 October installment)

= €214.53 owed on policy


So my questions, is 2/3 of a policy paid for 1/3 usage a normal amount?
The cancellation fee surely is the amount to cancel?
Am I missing something here?

Thanks for any input in advance!!

:cool:



*****
I didn't want to make it even more complicated, but since the demand for 214.53 arrived the DD had gone out, so I've left the "original" figures intact instead of lowering the demand amount and adding another instalment payment.

peteb2

You are a big assumption that when you cancel a policy it is calculated pro-rata on a daily basis. The fact is that it isn't calculated that way. In your first year of insurance you get charged short-term rates and the return is usually calculated in terms of percentage. e.g. if you can cancelled in 1st quarter, whether it be day 1 or 80, the amount returned is 75% of the original premium.

This amount is set out in your policy wording so you need to read that. Or if you are feeling lazy, why dont you just ring the company and ask them to explain the amounts.

robodonkey

Thanks for that.

So it is then entirely plausible that after 90 days insurance I could owe ~65% of the cost of a years insurance?

Rightly or wrongly I think that's pretty bad value.

I mean, their risk is exactly the same Q1/2/3/4 or however long you are with them, so why front-load the policy payee regarding cancellation of same?

Sheisters the lot of them *no offence intended if you are in insurance :P *

galwaytt

robodonkey wrote: »

Thanks for that.

So it is then entirely plausible that after 90 days insurance I could owe ~65% of the cost of a years insurance?

Rightly or wrongly I think that's pretty bad value.

I mean, their risk is exactly the same Q1/2/3/4 or however long you are with them, so why front-load the policy payee regarding cancellation of same?

Sheisters the lot of them *no offence intended if you are in insurance :P *

As Peteb2 says, it's not charged pro-rata. No insurance is.

Why front-load ? To stop people trying to buy short-term insurance at an artificial price.

And......because they can - that's part of the terms & conditions, when you sign up.

C'est la Vie, as they say....

peteb2

yep. you've generally got 14 to 28 days to read your policy wording and decide whether or not to go with it! So its your call!

robodonkey

Ta for replies folks. Looks like I'll be a few hundred lighter so