Can I Switch Car Insurance Providers If I’ve Had a Payment Holiday?

If your policy is due for renewal, you may want to switch companies to save money - but what if you’ve had a payment deferral? Find out here.

A person with a face mask and gloves on and holding the steering wheel
August 19, 2020

According to comparison site GoCompare, September is one of the busiest months for car insurance renewals in the UK, as historically, it is the month which has the most new car sales in the UK. 

Many motorists, however, make the costly mistake of auto-renewing with the same insurer every year, but by switching providers, they could be saving as much as a few hundred pounds on cover. 

And throughout the Coronavirus pandemic, many drivers have taken a payment holiday (or deferral) with their car insurer to help ease financial hardship, so these motorists are left wondering whether or not they can still switch to save money on their premiums. 

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Car insurance payment holidays 

In May 2020, it was announced by the FCA that car insurance policyholders were able to ask their insurers for a payment deferral if they were struggling financially as a result of Covid-19. 

Customers have until 31st October this year to apply for a payment holiday, which can last between 1 and 3 months, and they will need to discuss how it will be paid back with their insurer, depending on the options available. 

The FCA has also told insurers that if a payment holiday is not the best option for certain customers, then they should offer reduced payments where possible. 

With millions of motorists able to take a payment holiday or get reduced cover, drivers are now asking whether or not they can still switch providers

Read more: Millions of Drivers Have Paid at Total of £1.9bn for ‘Loyalty Tax’ 

Can motorists who’ve taken a payment holiday still switch? 

GoCompare has said that drivers are able to compare quotes and shop around online as they wish, and they are entitled to switch car insurance companies provided that they are willing to cover any potential cancellation fees and pay back the money they owe from any payment holidays. 

By doing a little research and comparing quotes online, drivers may find that they are better off staying with their insurer as the potential savings they could make from switching providers might not be worth it after paying any admin or cancellation fees. 

CEO of GoCompare’s car insurance department, Lee Griffin, states:  

“For some people, remaining with their current provider may be good for them, but without shopping around to see what other insurers are willing to offer them it’s almost impossible to know. 

Taking a payment holiday does not affect your right to switch insurers, and with potential savings of hundreds of pounds for those who shop around, we would urge people to consider all of the options available to them carefully.”

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Paying back a payment holiday with your insurer

Each car insurance provider will have their own rules regarding how you must pay back any owed money from a payment holiday and whether the full amount needs to be repaid before switching or not. 

If you have taken a payment holiday with your insurer, you’ll need to discuss directly with them how you’re going to pay it back, whether as one lump sum or spread out over a few months, but it is more than likely that you already made this arrangement when taking out the payment holiday with your insurer. 

Before agreeing to any sort of payment deferral, it is important to make sure you have read the small-print. 

Switching providers: Will the insurer ask me if I've taken a payment holiday? 

If you are going to compare car insurance quotes online, you will usually be asked how you want to pay for it; i.e. either monthly or annually. But there are currently no payment holiday-related questions during the application process, so you will not need to declare this. 

Anything to do with your payment holiday should be discussed with the insurer you had the deferral with. 

At Bobatoo, we always recommend getting an annual car insurance policy, as this is generally the most cost-effective option. By paying monthly, you will incur interest, so it’s likely that you’ll end up paying more for cover overall. 

What about my credit score? 

When payment holidays first came to the fore in the UK in May, customers were told by companies and credit reference agencies that taking one would not impact their credit score

While payment holidays have not directly affected people’s credit score or shown up on their report, future lenders are still able to see if people have taken a payment deferral by using Open Banking, which shows whether or not you’ve stopped making any payments in the past. 

As a result, many people who took payment holidays during the pandemic are now being rejected by lenders when applying for a loanmortgage or credit card because they are deeming these customers as higher-risk than those who did not have one. 

>>> To see if your credit score has been impacted, check it now <<<

When comparing car insurance quotes, the insurer may do an automatic soft search just to check that your personal details are correct, but this won’t impact your score and other lenders won’t be able to see this. 

Generally, when paying annually for cover with just one payment, the insurer won’t check your credit score, but they will want to check it if you wish to pay monthly, as you are technically borrowing credit from them. 

How much can I save by switching? - Compare quotes now 

Motorists can save up to £300 by switching car insurance providers, which thousands of drivers are missing out on! 

By staying loyal to your insurer, you could be paying a few hundred pounds more purely for loyalty tax and no other reason. New customers are always given the best deals and the cheapest options, so why pay more when you could easily switch? 

However, after comparing quotes, you may feel that staying with your current insurer is the best option for you, but there’s only one way to find out! 

Compare quotes now to see how much you could save: 

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