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The Hidden Costs of Your Car Insurance Renewal

Letting your insurance auto-renew could be costing you hundreds every year. Here's how Canadians are handling it.

You know that envelope that comes in your mail from your insurance company detailing your car insurance policy? It’s often lengthy and full of jargon. You put it aside swearing you’ll get to it one day, and, in time, it ends up crumpled at the bottom of the recycle bin. Well, you just got auto-renewed.  

And you’re not alone. 

According to our recent survey, polling 1,300 drivers across Canada, 64% of Canadians let their car insurance policy auto-renew.  

Letting your car insurance policy automatically renew could be costing you hundreds of dollars each year. Over time, that’s thousands you could be spending on debt repayments, reducing the principal on your mortgage, or investing in the market. 

Personally, I too let my insurance auto-renew last year. During COVID I called to ask for discounts(was this the first time I was actually speaking with my insurer?). I never left my insurance company because of the group discount my partner was getting. I wasn’t going to get cheaper car insurance, or was I? 

The majority of Canadians (84%) have been with their insurance company for two years or more. Specifically, 16% have been with the same provider for 2-3 years, 10% remain loyal for 4-5 years, and those who have been with their insurer for more than 5 years came in at an astonishing rate of 58%. Worse, if you’re over 35 years old, you’re 77% more likely to have been insured by the same company for 4 years or more. 

I couldn’t ignore the facts. So, I took a different path when my car insurance renewal came in the mail. This time, I started to compare car insurance quotes online. Long story short, after speaking with Morgan Roberts, Director of Sales at RH Insurance,  we were able to finalize my new policy. I’m now saving $600 on home and auto insurance this year all because I didn’t let it auto-renew. 

I’ll break down my process for you to help you fast-forward your savings. 

When can you renew car insurance?

Your insurance company sends a letter in the mail about 45-60 days before your auto insurance policy is up for renewal. You can renew 30-45 days before your renewal date. Or, you can spend as little as 5 minutes comparing your auto insurance online (enter your postal code above), or by calling a broker like Morgan. 

Know that when you renew depends on the length of your policy. Typically, car insurance is sold on an annual basis, but you can buy 6-month policies. 

Can you renew your car insurance early?

My home insurance was up for renewal, but my car insurance wasn’t due for another 4 months. You can switch insurance companies mid-policy, especially if you find a better rate. However, know it could cost you at least a month’s premium. For me, I got a refund on both my policies, plus the benefit of the new cheaper rate. I didn’t need advanced math to put these numbers together to determine the cost savings.

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Why you shouldn’t automatically renew your car insurance policy

While 69% of Canadians say they review their car insurance policy every year, over a quarter of Canadians (26%) don’t.

I’ve been writing about insurance for years and I’m still uncovering some of the details. 

Do you know how you can save on car insurance or the right questions to ask your car insurance broker?

It’s why I wrote another post: Making sense of your auto insurance application. It literally breaks it all down so you understand all the acronyms on the page, and the costs associated with each coverage type to understand what you’re buying. It’s a simple breakdown, however, it’s a bit lengthy (don’t worry, you can jump around easy enough). 

But, this could be why 51% of Canadians don’t like to shop around and compare. They say it’s time-consuming, that they won’t get a better deal. 

  1. It takes 5 minutes, honestly. Our quoter is just above this line. There’s no obligation to buy. How long does it take you? (FYI: We're always trying to make it faster).
  2. When you figure that out, calculate the value of your time. What’s your salary, divide it in half, that’s a rough idea of what you make per hour. If you can potentially save even $100 in 5 minutes by comparing car insurance online, is it worth your time?

Only 35% of Canadians said they compare car insurance rates every year. Car insurance companies change rates every quarter, potentially for reasons that have nothing to do with your driving, and all to do with their risk tolerance. 

While 65% claim to be happy with their rate, 31% aren’t. If you’re auto-renewing, how can you be sure you’re still paying the best rate? Make it an annual tradition that when you receive the slip in the mail, you hop online to compare rates. 

Getting the right insurance at the best price

According to our survey, 76% of Canadians are confident they have the right insurance coverage in place. They are not over, nor are they underinsured. As for the rest of our over 1,300 respondents in the survey, 14% don’t feel confident they have the right coverage and 9% don’t know. 

It’s possible to feel confident that you have the right insurance coverage because you’ve never made a claim. But, for those 76% of Canadians, be sure to understand your coverage gaps. 

  • Do you want a rental car if yours ends up in the shop? Make sure to have OPCF20 added to your policy. It’s an add-on, not a default. 
  • Do you live in an area with a high-rate of vehicle theft? Without comprehensive coverage (another add-on), your insurance company won’t help you. 
  • If you’re in an accident, where you’re at fault, your insurance company only covers you if you have collision insurance on your policy. 

The basic, standard, and mandated car insurance on its own does more to help pay for your liability to other people and their vehicles and provides medical support after an accident. With collision and comprehensive insurance (additional coverage you can optionally purchase) you get the protection for your vehicle itself. 

Seek clarity with your insurance agent or broker. Ask questions like, “What happens if…” and see what you get. What insurance coverage don’t you have? Understand your coverage, if you don’t, it could cost you thousands of dollars. 

Another interesting finding from our survey was that 23% of Canadians stayed with the car insurance company that their parents are with. It’s likely this may have been for convenience versus best coverage and rate. You can and should choose better with your finances. Better rates equals better sleep. 

The bottom line 

When does your insurance renew? Set a reminder on your phone to check auto insurance quotes online every year. If it renews within 60 days, compare quotes now. Remember, 5 minutes could mean big savings, and if not, at least you know you’re getting the best rate. 

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