With the exception of the fairly new practice of issuing pay as you go car insurance policies, when you purchase car insurance you are entering into, and bound by the conditions of, a fixed term contract with the car insurance company. In the vast majority of cases this fixed term is for exactly one year since the date of the policy’s inception or beginning.
As you near the end of the period of cover, your insurance company will invite or tender you to renew the contract. These days the systems employed by large car insurance companies will trigger the renewal procedure which initially means the production and posting of a set of renewal documents to the policyholder. This is usually timed so that the invite to renew pack is produced automatically around fifteen days prior to the termination of the existing car insurance contract, giving the prospective renewal policyholder time to correspond with the car insurance company and inform them of any changes that may have occurred during the term of the contract which are not reflected in the renewal documents.
If you intend to renew with the same insurance company you are legally bound to inform this company of any alterations to the statement of fact that you originally made when you first took out the policy.
Likewise you may wish to add or remove elements of cover from the current status of the car insurance policy, as your requirements may well have changed over the previous year.
Because of the compulsory nature of third party car insurance, no ‘days of grace’ are allowed after the renewal date of the policy. This can cause problems for car insurance companies as for practical purposes renewal documents and certificates have to be produced and dispatched to the prospective renewal policyholder in advance, which will become operative from the first day of the new period of insurance.
The renewal certificate, required by law to tax a motor vehicle, in theory cannot be issued until the renewal premium is paid. If payment was received subsequent to the expiry date of the existing car insurance policy, then the certificate would have to be re-written with the operative time and date matched to the time of payment. This could cause a major problem for the car insurance companies, as to issue an unaltered certificate would be equivalent to ante-dating it, which is a criminal offence, whilst re-writing the renewal documents would result in additional costs and expenditure to the car insurer, and more importantly would leave gaps in cover for the policyholder, which would leave a driver exposed to risks and legal action for driving without car insurance.
In order to overcome these practical difficulties of renewals, car insurers have developed a practice of incorporating into the renewal documents a certificate of insurance that is valid for an extended period of seven to fifteen days. This benefits both the prospective renewal and the insurance company by extending the period during which the insured has time to pay the renewal premium, yet still receive a certificate dated from the first day of the new contract period.
Car Insurers are particularly sensitive to what is known as the ‘renewal retention ratio’ , the number of renewals expressed as a percentage of the previous years total policies issued, especially since the introduction of online car insurance underwriting which has enabled a prospective renewal to shop around much easier and perhaps to change supplier.
The issue of this temporary certificate of cover in effect and contract law, constitutes an offer by the car insurance company, which the insured must either accept expressly, by paying the renewal premium, or by implication by doing nothing and having the premium taken from the payment source of the previous year’s policy.
If however the prospective renewal obtains car insurance cover elsewhere or by some action, such as a telephone call, implies that he does not intend to renew and thereby not accept the offer, then this temporary cover would be deemed invalid. If a policyholder does not for some reason receive the renewal quote and certificate, or was unaware of the wording of the renewal notice, he cannot accept an offer and is therefore entitled to a full refund if the money has been debited from his account.
With the vast amount of choice available online for car insurance today, ranging from specialist car insurance schemes targeted at a particular group to the aggregator comparison websites, huge savings can be made by a policyholder at renewal if they are prepared to shop around for equivalent cover. It may not be in the best interests of a policyholder to blindly accept an offer to renew a car insurance contract without recourse to other offerings in the market which may be more suitable for their particular circumstances. Car Insurance rates vary immensely and it is not unheard of for companies to match or better a renewal offer from a competitor if you pick up the phone and give them a ring.