Getting Car Insurance After Cancelled Policy
Getting Car Insurance After Cancelled Policy
Most auto insurance policies spell out exactly what to do if you want to cancel your policy early. But what if the insurance company decides to cancel your coverage? How do you go about finding a new policy in the event of a cancellation?
Below are your options if your insurance company informs you of a policy cancellation, as well as the top reasons car companies cancel policies, the long-term consequences of a cancelled policy, and how to find new auto insurance coverage post-cancellation.
Six reasons insurance companies cancel auto policies
When you purchase car insurance in Canada, you sign a contract with the insurance company. If either party fails to hold up their end of the bargain, the contract may be broken. However, an insurance company won’t cancel someone’s policy without good reason (at least outside of the initial 60-day window). Some of the top reasons that car insurance companies cancel auto insurance policies are non-payment, fraud, and misrepresentation.
Non-payment is the most common reason that auto insurance policies get cancelled. If you miss a payment, even just one, your insurance company will notify you that you have a set number of days to pay the outstanding balance (usually 15 days). If you fail to make the payment after the deadline has passed, the insurance company may cancel your policy.
Keep in mind that even if the insurance company cancels your policy, you still have to pay your bill. Specifically, you must pay for the period between your last monthly payment up to the point that your policy was officially cancelled (this is what’s known as time on risk). You won’t be able to buy a new auto insurance policy from another company until the balance is paid. For this reason, it’s best to settle your current debt before trying to obtain a new policy. If you’re ever in danger of non-payment, contact your insurance company as soon as possible to inform them which might help avoid a policy cancellation.
Another reason insurance companies cancel auto insurance policies is due to misrepresentation, which is when a policyholder withholds information or lies about their driving record or claims history. This is usually done to receive a cheaper rate. However, if (when) the insurance company finds out that you misrepresented the truth, they could cancel your policy. An example of misrepresentation is failing to mention that other people will be driving the vehicle regularly (to avoid paying a fee for additional drivers) or hiding the fact that the vehicle is used for both personal and commercial purposes. Non-disclosure or omission of truth count as misrepresentation, which is why policyholders should always tell the truth when applying for auto insurance.
Suspended driver’s licence
There are many reasons why the authorities may suspend someone’s driver’s licence. In the event your licence is suspended or revoked, your insurance company may cancel your auto insurance policy. If your licence is in danger of being suspended, contact your insurance company or broker right away.
A change in risk
A material change in risk, also known as a change in situation, is another reason that auto insurance companies cancel insurance policies. An example of a material change in risk is if you are diagnosed with a medical condition that makes it dangerous to drive, such as problems with your vision. If a change in risk occurs, your insurance company can cancel your policy.
Similar to misrepresentation, fraud is another reason an insurance company could cancel your policy. Insurance fraud is when a policyholder files fraudulent claims or lies about the circumstances of a loss. To avoid having your policy cancelled due to fraud, always be honest with your insurance provider and never file an unwarranted claim.
Filing too many claims
One final reason that an insurance company in Canada might cancel your policy is because you file a large number of claims, especially if they are filed in a short time frame. Filing too many claims is a red flag to insurance companies as it indicates that you have been involved in an above-average number of incidents. This can lead to your insurer cancelling your policy and you being deemed a high-risk driver, making it harder and more expensive to obtain auto insurance in the future.
What to do if you can’t afford to make a auto insurance payment
If your next auto insurance payment is not due yet, but you know you won’t be able to pay it on time, it’s imperative that you contact your insurance company as soon as possible. If you contact them and inform them of your predicament in advance, you have a better chance of working out a new payment plan and avoiding cancellation. For example, the insurance company might agree to postpone payment or temporarily extend the due date until you can pay the bill. Insurance companies have the ability to offer a bit of leeway when it comes to payments, especially if you have a legitimate reason.
If the payment due date was a few days ago
If the payment due date passed, you might still be able to have your policy reinstated if it’s only been a few days to a week late. The period immediately following the instalment due date is known as the grace period. If you pay the amount missed within this time frame, the insurance company is not likely to cancel your policy, though the payment may be subject to a late fee. Before you reach this point, contact your insurance company or broker to find out the exact length of the grace period and the cost of the late fee.
The consequences of a cancelled auto insurance policy
The consequences of an insurance company cancelling your policy are serious. Whatever the reason, policy cancellations have long-term consequences and can lead to difficulty obtaining a new policy.
Driver’s licence suspension
Auto insurance is mandatory in every province and territory in Canada, and many regions require insurance companies to notify them if a driver’s insurance policy lapses or is cancelled. Therefore, if an insurer cancels your policy, it could result in an automatic suspension of your driver’s licence until a new policy is obtained. Since driving without insurance is illegal, you would not be able to get behind the wheel legally until you have a new policy.
More expensive auto insurance rates
When your auto insurance policy is cancelled, this goes on your record, making it more difficult to obtain a new policy in the future. Insurance companies reward drivers who pay their bills on time and have clean driving records. Policy cancellations make you a riskier investment, which can lead to higher auto insurance rates. In some cases, you may be required to purchase facility auto insurance – which is designed for high-risk drivers.
Repossession of a financed or leased vehicle
If you drive a financed or leased vehicle, it could be in danger of repossession if your insurance policy is cancelled. This is because many lenders require drivers to maintain full coverage on their vehicle for as long as it is financed. If the lender finds out your policy was cancelled, they could repossess your car.
A lower credit score
One last consequence of a cancelled auto insurance policy is a lower credit score. If you have an outstanding balance with your insurance provider, the insurer could pass this information to a collection agency. In turn, this could impact your credit score, making it more difficult to take out loans, including a mortgage or credit card in the future. Most incidents remain on your credit report for seven years.
Top three tips to avoid having your car insurance policy cancelled
- Tell the truth
Do not lie or omit the truth from your insurance company in an effort to obtain a cheaper rate. It may seem like a great way to save money, but if caught, there are serious consequences, including policy cancellations and hefty fees. Therefore, whether filling out an auto insurance application or filing a claim with your provider, always tell the truth.
- Follow the rules of the road
Drive safely by following the rules of the road. When you drive safely and responsibly, you are less likely to get into an accident, which means fewer claims. This leaves you in better standing with your insurance company, so in the event you weren’t able to make a payment, they might be more inclined to give you some leeway. Plus, when you drive safely and avoid infractions, your insurance premium will likely be lower.
- Make payments on time
The last tip for avoiding a policy cancellation is to always make payments on time. If you frequently miss deadlines due to forgetfulness, set a monthly payment reminder on your phone or computer, or consider purchasing an annual policy with one payment due date, if feasible. In the event you can’t afford to make a payment on time, contact your insurance company as soon as possible (ideally before the payment due date or no more than a few days after). Notifying them in advance will increase your odds of them working out a new payment plan with you versus cancelling your policy altogether.
What to do if your insurance policy is cancelled
Despite following the tips above, there may come a time when your policy gets cancelled. If this happens to you, try not to panic. Your insurance company is required to give you advance notice of a policy cancellation. This notice will either be sent in the mail or sent electronically by email. The notice will detail both the reason for the cancellation and the cancellation time frame. Typically, cancellation due to non-payment requires 10 days’ notice, whereas cancellation for other reasons can be given up to 45 days in advance. Should you receive a notice of policy cancellation from your insurance company, you have two options. The first is to fight the cancellation by presenting your case to the insurance company, and your second is to accept the cancellation and find a new policy.
Option one: make your case to the insurance company
If you think your insurance company is not warranted in cancelling your policy or you had a valid reason for the cause of the cancellation, you might decide to fight the cancellation. In an effort to have your policy reinstated, you will need to plead your case. To do so effectively, you must provide concrete proof that you are not a high-risk driver. Proof varies considerably and largely depends on the reason for the policy cancellation. In general, the goal of making your case is to prove to the insurance company that you are a safe and responsible driver who is unlikely to file many claims in the future. As part of your case, you could also propose increasing your deductible (especially if most claims were under $5,000). You could even inquire about an alternative car insurance policy, like one tailored to high-risk drivers, which would likely be more expensive but could help you avoid cancellation. Lastly, you may wish to highlight your loyalty and value to the insurance company over the years by detailing how much money you’ve spent with them (totaling all policies). Once you’ve presented your case, which can be done over the phone or in person, your insurance company will likely take a few days to review it. Upon review, they will either decide to reinstate your insurance policy or continue with the cancellation.
Option two: find a new car insurance policy
If you receive a car insurance policy cancellation notification from your insurance company, your second option is to find a new policy. This may be your only option if you were unable to successfully plead your case.
Whatever road led you to this place, finding a new car insurance policy is vital, especially since driving without insurance is illegal in Canada. Depending on the circumstances of your cancellation, finding a new policy might not be too difficult. For example, if the cancellation was due to you failing to disclose another driver, you can likely find a new policy easily, so long as you disclose all drivers this time. That said, if your policy cancellation was due to non-payment, fraud, or a driver’s licence suspension, you may not be able to find a new policy as quickly. In this case, you should contact a broker to discuss your options. They can let you know if you are eligible for car insurance from a standard provider or if you need to seek insurance from a provider specializing in high-risk drivers.
Steps to getting auto insurance after a cancelled policy
Finding auto insurance after a cancelled policy is harder than it sounds. Ultimately, even if you are not eligible for a standard car insurance policy, you will still be able to buy high-risk or facility insurance. Keep reading to discover the three steps to obtaining car insurance after a cancelled policy.
Kick things off by contacting an insurance broker. In fact, this is a great first step, whether your existing policy has already been cancelled or is in danger of being cancelled. The experts at DPM Insurance Group can review your case and help you fight the cancellation, if applicable, or help you find a new car insurance policy.
Contact DPM Insurance Group for your next auto insurance policy
Do you need an auto insurance policy? The brokers and CSRS at DPM Insurance Group are here to help. You can get in touch by phone, email, or in-person for help finding an auto insurance plan that meets your needs and budget. Click here to find the DPM office most convenient for you: https://dpmins.com/locations/