What Happens When Your Insurance is Cancelled for Non Payment
After purchasing a vehicle in Canada, one of the first things you have to do is obtain auto insurance.
Having auto insurance gives you peace of mind on the road due to the fact that you'll be financially covered in the event of an accident (if you're deemed not at fault).
Not to mention, Canadian law requires drivers to have auto insurance, so one could say that it's necessary.
Have you ever wondered, "what happens if I miss a car insurance payment in Canada?" — continue reading to find out the consequences and some useful tips on how to avoid missing future auto insurance payments.
Common reasons why Canadian drivers miss auto insurance payments
Before we dive into the topic at hand, let's go over some of the common reasons why many Canadians accidentally miss their car insurance payments.
- Genuinely forgot
- Payment bounced
- The driver moved money around their accounts and didn't leave enough for the payment
Whether it's an accident or not, your auto insurance provider will see a missed payment as a red flag, especially if it isn't your first offence.
Consequences of missing an auto insurance payment
Whether it's your first or fifth incident, missing an auto insurance payment is a severe issue that should be addressed immediately.
Although each company has different standards and expectations, failing to make one or multiple auto insurance payments in Canada generally leads to at least one of the following consequences:
Getting your car insurance cancelled is quite inconvenient. Not only do you have to search for a new provider, but you also lose access to your vehicle.
Stain on history
An insurance cancellation leaves a gap in your history. Future providers will often see this as a negative factor when deciding whether or not they will insure you.
May have to find a new provider
If you miss one or more payments, your insurance provider may decide to stop insuring you. This means that you’ll have to start looking for a new company.
If you don't have to find a new provider, your current carrier may request to reassess your policy and increase your premium. This is because they see you as more of a liability.
NSF (which stands for non-sufficient funds) fees are additional fines that are charged to drivers (based on the provider's policies and discretion).
Affect on your auto insurance history
As mentioned above, missing one or more auto insurance payments often leads to cancellation, which in turn, leaves a gap in your history.
Insurance providers use their records to determine who they will insure and their rates. The more significant the gap, the less likely it is that you'll get accepted. Furthermore, you will likely have to pay more than the average Canadian driver if you are accepted.
This means that missing an auto insurance payment will affect you in the short and long run; not only are you at risk of cancellation, but you may have to pay more for auto insurance in the future.
Additionally, it's worth noting that Canadian drivers that miss multiple payments may no longer be eligible for a standard auto insurance plan and may have no other choice but to switch to a high-risk auto insurance policy.
How long does a missed payment stay on your insurance record?
While assessing your payment history, many insurance providers will go back anywhere from three to 10 years to look for missed payments.
With this in mind, you can see why it's imperative to stay on top of your auto insurance payments. A single mistake can stain your record for a decade or more.
Getting a new auto insurance policy
After missing a payment or two, acquiring a new auto insurance plan can be quite an uphill battle. A driver with multiple gaps on their record may have to spend a lengthy amount of time looking for a provider that will insure them.
If you plan on switching insurance carriers, your prospective providers may ask you about the gap or gaps in your insurance history. Should this happen, be honest and upfront about your missed payments. Doing this will show your potential providers that you are responsible and have learned from your past mistakes.
How to avoid getting your insurance cancelled for non payment
Are you sick and tired of getting your auto insurance cancelled for non payment Canada? Be sure to make use of the following list of tips and tricks that we've put together:
Set up an annual payment plan
Setting up an annual payment plan is by far the easiest way to guarantee that you don't miss any auto insurance payments.
Annual payment plans require drivers to pay for the entire year's worth of insurance at once. Although this may seem expensive, it's often worth it in the long run. Not only does it prevent you from missing payments, but many auto insurance providers offer a discount to drivers that make annual payments.
If paying in full isn't feasible, the next best option is to set up monthly reminders. You can do this by writing it on your calendar or scheduling notifications on your smartphone.
Bonus Tip - Set the reminder a few days before the payment is due, giving you time to make a game plan or move money around (if needed).
If needed, you can also set up an overdraft system for your bank account. Setting up an overdraft system allows you to borrow a small amount from your bank. When you're slightly short on cash, this is a great way to ensure that you have the funds to make a complete payment.
What have we learned?
As you now know, missing even a single auto insurance payment can lead to severe issues down the road (no pun intended, we promise).
If you'd like to learn more about missing an auto insurance payment, be sure to reach out to your insurance agent. Your insurance agent can provide you with details about specific questions you have.