Insurance premium tax – renewing your policy early
Published 18 October 2015 by Emily Bancroft
The prices of various insurance policies are due to increase, so should you lock in at the cheaper rate?
We recently told you about the upcoming increase in the rate of insurance premium tax(IPT). From November, the basic rate for tax on insurance premiums will rise from 6% to 9.5% – and this means that many insurance policies are likely to get a bit more expensive.
Now that the date for the increase is getting closer, it could be a good time to start thinking about renewing your policy early, so that you miss out on the rate rise. But will this be worth doing, or will you end up paying more overall? Let’s take a look at how you could save on your insurance policies.
Why renew early
If your car insurance policy is due to automatically renew in late November, just a few weeks after the IPT rise comes into force, it might be worth renewing early. This would mean you could ‘lock in’ to the lower price and you’d manage to avoid the rate rise.
You’ll have to do the maths to see if this would be worth it for your policy. For example, let’s imagine you currently pay £10 a week for your car insurance – divide your monthly payment by four and you’ll have a rough idea. In this case the extra cost of the increase in IPT will be almost £17 a year (that’s 3.5% of the annual premium). If your policy is due for renewal on the 5th November but the IPT increase kicks in on the 1st November, it could be worth buying a new policy before the start of the month.
How to save
If your policy isn’t due to expire within the next few weeks, don’t worry – your insurance premium isn’t likely to increase by an unaffordable amount from November. Research from Money Supermarket suggested that a family with two cars will pay about £35 more in insurance premiums a year. You might be able to switch to a different provider and find a cheaper deal, so the IPT increase won’t affect you too much.
Try searching on a price comparison website like Confused.com to find out what deals are available for you. It might also be worth manually checking insurers who aren’t on comparison websites like Aviva and Direct Line, as you otherwise you will miss out on offers they might have.