Cancelling your car insurance

by Joel Kranc September 7, 2018 / No Comments

Car insurance is the law in all Canadian jurisdictions and must be purchased by every driver. But there are times where it may be necessary to cancel your car insurance. For example, you may want to change providers to get a better deal, you may want or need to give up your car, or you are moving to a new jurisdiction.

Regardless of the reason, cancelling car insurance can be discussed with your insurance provider. Generally speaking, there is no specific time to cancel insurance, but there are two times people consider it –  renewal time or mid-policy.

Renewal time is the best time to consider a policy change. It’s a good opportunity to seek out other auto insurance quotes or even discuss new options with your current provider. It’s also a good time to change or cancel policies while avoiding potential charges or cancellation fees (more on that below).

Mid-policy cancellation can cost you in fees and other charges. Insurance providers anticipate a full year of payments when providing car insurance to you and may charge for your change of heart. Fees or cancellation penalties can range from as low as $25.00 to as high as some percentage of your overall premium. It’s always important to check the fine print of your policy before you make any final decisions.

Cancelling your car insurance should result in a refund, but your refund amount can vary. Car insurance companies will either offer a pro-rated cancellation, which gives you back the full amount of the unused premium.  A short-rate cancellation takes a certain amount out of the refund as a penalty for early cancellation. 

Always be sure to mind the gap with car insurance cancellation. During the cancellation process, there is a possibility of gaps that may occur in your auto insurance coverage. A gap in your coverage history can affect your overall rating and increase your premiums. If you are cancelling coverage with one provider but expect to seek coverage elsewhere, be sure to bridge those gaps.  You can either add yourself to another vehicle, if you have one, or ensure there is no lag time between policies.

It is important to consider alternatives to cancelling because fees and costs can be a detrimental factor. Drivers can consider reducing their coverage or shop around for new car insurance quotes to lessen the economic burden.

What you should really try to avoid, if costs become prohibitive, is not paying your bills and running afoul of the law. Defacto cancellation by not paying bills will only cause you problems later if you are in need of insurance in the future.

If you are unsure about policy fine print or other legalese, and you have a broker, ask for their help as well as you may find the process easier to navigate. If you feel confident in your knowledge, speak directly with your insurance provider about ways to reduce your premiums.



Photo by: Geralt