How to avoid sneaky car insurance fees

Some motor insurers are increasing car insurance fees and charges for motorists. We reveal how to avoid them

Woman leaning out of a car window holding a set of car keys
(Image credit: Getty images)

Some car insurance fees have gone up by a whopping 25% over the past five years according to Defaqto (opens in new tab)

If you are shopping around for cheap car insurance it pays to look beyond the headline policy price as there may be other fees and charges to consider.

Since January 2022 there has been a ban on price walking – this is the practice where insurers offered cheaper deals to new customers – at the expense of loyal ones.  This should mean prices are more transparent.

But when it comes to other costs - some insurers have been putting up charges and fees for anything from a change to your policy to the cost of cancellation.

Defaqto says 48% of standard comprehensive motor policies now include a set-up fee, compared with just 21% five years ago.

This will be included in your quote rather than a stand-alone fee. But, the average fee is £40.02,  which has gone up by 25% since 2018.

Mike Powell, Motor Insurance Expert at Defaqto (opens in new tab) said: “Most people tend to look at the headline premium figure when buying car insurance and do not always see the additional fees, which can be added on later”.

“It is always worth checking the terms and conditions before buying any insurance, to make sure there aren’t any unexpected fees”.

Which car insurance fees have gone up the most?

Set-up fees and renewal fees have both gone up by 25% although both are included in the cost of your policy price.  

Consumer group Which? (opens in new tab) says renewal fees are relatively rare and typically charged by brokers. It says both Hastings Direct (opens in new tab) and the RAC (opens in new tab) charge £40 to renew policies.

Other charges you can incur include a cancellation fee, which is charged  if you decide you no longer need or want your policy. This has gone up from £47.02 in 2018 to £52.42 in 2023 – a rise of over 11%.

When taking out motor insurance you get a 14-day cooling-off period -  but, providers can charge a cancellation fee within this timeframe. This typically ranges from £20 - £39.99.

Beyond the cooling-off period, cancellation charges are higher. Around one in three comprehensive car policies impose charges of £60 or more to cancel cover at this stage.

What are adjustment fees?

Making any change to your motor policy usually results in an adjustment fee.

Also known as an administration fee, this can be charged if you change your car, add another driver to your policy, move home or change your name.  

The average price for an adjustment fee is £28.64 and this is in addition to any increase in policy price, as a result of the change made.

Ways to avoid car insurance fees

When shopping around for motor insurance it’s worth looking beyond the initial policy price and level of cover.

Powell said: “Consumers must check and ask about the fees that are charged so that they are aware before buying their insurance cover”.

These fees will be listed in the insurer’s ‘terms of business’ although it’s often easier to ask first. 

“Policy fees such as the setup and renewal fee are included in the premium that is quoted to the policyholder, but if a policyholder is looking make a change in the future like changing their car, or adding a driver, it’s advisable to check what fee would be charged by the insurance provider”.

Haggling with your insurer can be a way to reduce or waive these fees, as some insurers may allow you to make one change during the term of your policy. 

Sue Hayward

Sue Hayward is a personal finance and consumer journalist, broadcaster and author who regularly chats on TV and Radio on ways to get more power for your pound.  Sue’s written for a wide range of publications including the Guardian, i Paper, Good Housekeeping, Lovemoney and My Weekly. Cats, cheese and travel are Sue’s passions away from her desk!