The 58 per cent increase in insurance premium tax will come into effect on 1st November, meaning motorists, especially young drivers, will face hefty costs. But some drivers may be able to avoid it.
According to UK price comparison service uSwitch, some savvy customers could beat the hike by taking out a new policy on 31st October before the prices go up.
Although cancelling a policy before the end of the year will mean customers won’t benefit from a ‘no claims’ bonus, it could save them from a spike in their annual coverage costs.
Rod Jones of uSwitch said: “The insurance premium tax hike from six to 9.5 per cent will see consumers paying the price – especially young drivers who could see their policy increase by £40. However, some savvy consumers may be able to avoid the hike by taking out a new policy by the 31st October.
“Similar to the trick employed by cash-strapped commuters renewing their season tickets a few days early to avoid fare increases, drivers may be better off taking out a new policy before their existing one expires. If your policy is due for renewal in the first 12 days of November, you could be better off cancelling the existing policy and starting a new one on the 31st October before prices go up – even though you won’t get any money back for the remaining days of cover.”
It’s not just drivers who will see costs rising, as home insurance policy customers will also suffer the same fate. Anyone with contents or building insurance could also be better off taking out a new policy at the end of the month, if there current one expires within the first days of November.
However, according to Jones, it is important that customers take a close look at their policy to avoid any underlying exit fees: “It’s important that you look at your policy carefully to see how long is left and if you’ll face any exit fees before deciding to cancel – as well as ensuring you’re not double covered.
“It’s also worth noting that you may not benefit from gaining a full year’s no claims bonus – which could help keep your new premium down. But, with the tax increase undoubtedly pushing up premiums, switching to a new provider early could not only help you avoid the hike, but it could also be a good opportunity to save money by shopping around.”