Must Read: Before & After Cancelling Car Insurance

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When looking to buy a car insurance policy, there is nothing wrong with wanting to find a better deal. We all do it and in fact, we do it every day. It’s nothing to feel guilty about, but it is something that requires a little caution. It’s not a good idea to cancel a car insurance policy without thinking about the consequences of doing so. This is due to the terms and conditions of your insurance policy when it was set up. You had agreed to those as the insured. Canadians do have a reputation for sober second thought and it is a wise strategy.

Can You Cancel Car Insurance Anytime In Ontario

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Anyone can cancel an insurance policy at any time as per the automobile consumer’s Bill of Rights in Ontario. But there are also certain responsibilities along with your rights. When it comes to cancelling an insurance policy, it needs to be requested to the insurance company in writing. You may do that by fax, post or email. It is suggested to include the following in your cancellation request to avoid any confusion:

  • Policy number and address
  • Name of the insured on the policy
  • The names of any listed occasional drivers
  • Effective date of cancellation of the policy
  • Request that automatic payments stop immediately on the effective date
  • If payment was made for the year a refund should be requested on the remaining premium

The process of putting instructions in writing may protect the policyholder. It’s an even better idea to send documents via registered mail for ease of tracking. This will clearly show the intent to cancel the insurance policy.

How to Cancel Car Insurance Without Charges

It is tempting to cancel an existing car insurance policy when you get a better quote. It could be with better savings and equal or better coverage level. However, before you grab the quote and agree to purchase, it is important to understand the offer. Even if it’s simply swapping one car insurance company for the another. It is still never a bad idea to approach the existing insurance provider. You may ask them if they’re willing to match the better rate. It’s always easier to get a better deal with your existing insurance provider than to switch to a new company. For one reason, you may not have to pay cancellation fees. The second reason could be that you could still keep the loyalty discounts. Or you may continue to enjoy any multi-product discount you have with your existing insurer. If these two are not applicable to you, it is recommended to try and wait for your policy renewal to avoid any potential fees.

Can You Just Stop Payments To Cancel Car Insurance Policy

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If you pay your insurance premiums monthly and are wondering if stopping the payments is the short cut to cancel your policy, you are seriously wrong. It would be a mistake to simply contact the bank and stop any preauthorized payments or put a stop payment on any cheques already issued for a current insurance provider. When an insurance provider attempts to withdraw their payment that payment will inevitably bounce and they’ll put a note in the policyholder’s file.  What then happens is your insurer would start sending you written warning letters. If you choose to ignore them, they may cancel their policy and this may lead to some concerns for you. This default will automatically show up in your car insurance history and will have a negative impact on premiums going forward. It might seem like an easy thing to do, but it’s simply not worth it in the end.

When your policy lapses due to defaulting on payments, you have violated the agreement and this will definitely be a negative aspect for your future insurability. No matter how difficult it may seem, it’s always a good idea, to be honest, and upfront with an insurance company and go through the right channels. Taking shortcuts is never a good idea and can actually end up costing quite a bit of money. It’s also possible that there may come a day when the previous provider offers a better deal and switching back will be an option if the relationship had ended amicably earlier. Apart from this, when there is a gap between the old policy and the new policy, it may not be good for your insurance record. This may lead to a lower insurance score rating and without a doubt your new insurer who gave you a better deal could consider you a high risk due to your payment default. You may also have to worry about this payment default affecting your overall credit rating in case you had a plan to apply for a mortgage.

Car Insurance Cancelled For No Payment Now What

When you default on your payments then your insurer will send you a cancellation warning letter. This will give you 30 days of time to pay your owing insurance premium. If you don’t, your insurer will cancel your policy. When your policy is cancelled by them, you are without any coverage for your car. If you were still driving your car under the impression that the policy could be still active, there could be serious trouble in store for you. It is illegal to drive without active insurance in Ontario.

In case, you did not have the new policy active and got caught while driving, you may end up paying a hefty fine of more than $6,000. You may even be charged with traffic conviction. Even if someone else was driving your car, that person could be fined around $65. Then the police may try to confirm if there was an active insurance later. This could be done anytime within a span of 3 years. As the owner, you are required to have active liability insurance for the car. In case you try to falsify an insurance copy and produce that, you may not be thrilled to pay a fine of more than $10,000.  If there is a collision or damage, you may not be able to file a claim. Even worse, you may be involved in an accident at-fault and without insurance. Your insurer has no obligations to pay for any personal injury or property damages as your policy is no longer active.

Can You Cancel Car Insurance Mid-Year in Ontario

Ontario car owners may think it’s a straightforward process when they want to cancel a car insurance policy to switch to another. This may invite some cancellation penalties. In fact, the Ontario Automobile Policy gives auto insurance providers the right to charge cancellation fees whenever a policyholder switches insurance providers. This policy actually provides a table known as a short rate cancellation table and it specifies the fees that insurers can charge. Most insurance providers in Ontario do use this table when calculating cancellation fees. This helps the insurers to recover any costs related to handling and administration when the policy was set up and issued.

Typically, insurance providers will only use the short rate table if a policyholder is cancelling their policy mid- term. On an average, Ontario drivers can expect to spend about 6% of what the policies worth on cancelling an insurance policy. It’s up to each individual to determine if it’s really worth compared to the savings on the new policy.

Do You Get A Refund If You Cancel Your Car Insurance

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It is very likely that an insurance provider will charge a penalty for cancelling a policy before renewal. It is also possible that a refund will be in order if the full year has been already paid for. When applying to cancel an annually paid insurance policy, the insurance company may prorate the refund amount based on the number of months that have elapsed since the policy began and pay out the difference amount. In a prorated cancellation method you may probably get a refund for the full amount of the remaining months on an annual policy. For example, if a policy costs $1500 annually and it’s cancelled after six months, assuming there are no penalties, the policyholder would be entitled to around $750 as a refund. When insurance is paid for on an annual basis it’s still possible that the issuing company will charge a cancellation fee, but this normally only happens during the first couple of months of the policy.

If the insurance company only uses the short rated refund policy there is a different process that they need to follow. They may have to deduct the cancellation fees as per stipulated in the short rate table from your refund amount before issuing it to you. It is a good idea to know if your insurer uses the, prorate or short rate method for cancellation terms and then weigh your best option. After all, it may not even be worth switching when you consider that your savings could be much less compared to the cancellation penalty when you change your insurer. As each  insurance provider may handle cancellations differently, so it is important to contact the provider and find out exactly what the fees are before cancelling the policy.

Can Car Insurance Providers Change Their Quotes

So, you got the best deal in town for car insurance and happily cancel your old policy. You may have either paid some cancellation fee or got a refund. You think your woes are over and can just rejoice about paying lower car insurance premiums and may brag about it. Until you get a letter from your new insurer with a different quote. Yes, this is possible. It is important to note that the new competitive quote that you receive could be an estimate. The insurance provider could revise your quote even after you have purchased their policy.

There is a time frame of 60 days for the insurer to do so, based on any underwriting or policy-related reasons. This may happen more so if you had not disclosed all material facts in absolute truth in your policy application. Or you may be in bad luck and the automobile policy reforms had changed some pricing terms. This kind of revision of your quote may even increase your premiums and you may receive this confirmation in writing from the insurance.  By then if you had already cancelled your old policy that turned out to be cheaper or equally good, you may have taken the wrong decision to switch. It’s just not a good idea to cancel an insurance policy without doing some homework first.

Obtaining Car Insurance After Cancellation

It is very important to note that keeping your car insurance current and with the proper coverage level is required as per law. For any lack of continuity in your insurance, you may suffer a lower insurance score rating. This could invite higher premiums when you apply for a new policy. With a gap in insurance, your status could be vague for risk criteria. This is more relevant when you had decided to cancel the only car insurance policy you had with you named as the insured.  If you cancel the insurance on one of the vehicles and still has another policy active, then it would be fine. You may get a car insurance policy after cancellation, but may be at a higher premium. After cancellation, your risk rating changes and so does the preference of your insurers.

If the insurer had cancelled your policy, then you are automatically rated as a high risk. It may not be easy to obtain cheap quotes and some may even deny your application. However, you may not be left without insurance as per law. Then you may have the option to get an insurance policy through the facility association. The insurance companies that are licensed for underwriting purposes are required to be a member of this association for those jurisdictions that the association serves.  So, this pool of insurers may have to give you an insurance quote as you were unable to get one in the voluntary market. If you could not get insurance elsewhere and belong to the high-risk residual market, you may get a policy even after cancellation through the facility association.


Resources:

https://www.thestar.com/opinion/columnists/2007/08/26/unwise_to_switch_firms__before_policy_expires.html

http://www.ontariotraffictickets.com/no-insurance/

http://www.fsco.gov.on.ca/en/auto/Pages/faqs.aspx#q9

http://www.facilityassociation.com/

https://www.fsco.gov.on.ca/en/auto/brochures/Pages/brochure_billofrights.aspx

http://www.fsco.gov.on.ca/en/auto/Pages/faqs.aspx#q10