Understanding the Consequences of Missed Car or Home Insurance Payments

When life gets busy or finances are tight, it’s easy for insurance payments to slip through the cracks. Whether it’s due to an emergency, a bank account change, or simply forgetting in the rush of daily responsibilities, missed payments can happen. 

But what actually happens when you miss an insurance payment? Failing to pay your insurance premium can trigger much more serious consequences, potentially leaving you uninsured and at risk financially.  

Missed insurance payments 

Missing an insurance payment in Canada can range from a minor hiccup to a major financial and legal problem, depending on how quickly you resolve it. 

In the short term, most insurers offer grace periods and will work with you if you communicate early, so a brief lapse of a few days can often be fixed with minimal fallout. However, long-term non-payment or habitual lateness carries serious consequences: your policy can be canceled, leaving you without coverage and in violation of auto insurance laws. 

Licensed Surex advisor Samantha Schmidt shares some of her insights on the issue. “My advice to clients who are unable to make an insurance payment is to contact their broker or insurance provider as soon as possible. In many cases, a payment can be deferred to avoid a non-sufficient funds (NSF) situation.” 

If you miss a payment, your insurer will notify you right away. Paying within the grace period typically allows you to maintain your coverage, though late fees may apply. A grace period is extra time (usually 15 to 30 days) to make a late payment without penalty, often included in mortgage and insurance policies.  

However, if you’re unable to pay in time, your policy could be cancelled—potentially affecting your credit score and insurance record. These outcomes apply to both car and home insurance, though the stakes are especially high with auto insurance due to legal requirements. 

If you expect to miss a payment or need to delay it, contact your advisor as soon as possible. They can explain your options and check your insurer’s grace period. 

The impact of missed insurance payments on car and home coverage 

Missing a car insurance payment in Canada can have different consequences depending on your policy’s terms. These include cancellation, higher premiums, and difficulty getting future coverage. It may also affect your driving record, loan approvals, or rental opportunities. 

Driving without insurance is illegal across the country, and even a single missed payment is a serious matter. It can result in your policy being cancelled if not resolved within the grace period, leaving you uninsured. 

When this happens, a lapse in coverage can also label you as a high-risk driver, leading to higher premiums and potential difficulties when renewing or obtaining future coverage. 

“If it's already too late, clients should try to schedule a recollection or make a manual payment to cover the missed amount prior to the scheduled cancellation date to avoid their policy cancelling for non-payment,” says Schmidt. 

If your auto insurance is cancelled, you legally can’t drive until you secure new coverage. In Canada, operating a vehicle without valid insurance is against the law and carries serious penalties. 

Home Insurance 

Missing a home insurance payment in Canada can still lead to serious consequences, even though it isn’t legally required. While there's no law mandating coverage, most mortgage lenders make it a condition of the loan. Having a valid home insurance policy ensures the home is protected and reduces the lender’s risk. 

Condo owners may face similar obligations from their condo boards, while renters might be required by their landlords to purchase tenant insurance as part of their lease. In any of these situations, missing a payment can result not only in a loss of coverage but also in a breach of your mortgage, lease, or condo agreement. 

Even though it isn’t mandatory, maintaining consistent home insurance payments is crucial for protecting your belongings and property, avoiding penalties, and staying in good standing with lenders or landlords. 

Non-payment cancellation on your insurance record 

The length of time a cancellation for non-payment stays on your insurance history can vary based on several factors. It depends on whether you remain with the same insurer or switch to a new one, as well as how many times you’ve been cancelled for non-payment. 

Most insurance providers in Canada typically review your payment history over the past three years, but some may look back six years—or even up to 10—when assessing your risk and determining premiums. 

Getting insurance after cancellation 

Securing insurance after a cancellation for non-payment can be difficult. A lapse in coverage raises red flags for insurers, who will want to understand the reasons behind the gap. 

Be honest during the application process—misrepresenting your situation can lead to immediate cancellation if discovered. If your policy has been cancelled, it’s best to work with an insurance advisor who can help you find a provider willing to offer coverage and help you secure the most affordable option. 

The real cost of missing a car or home insurance payment 

Missing insurance payments is a serious matter for insurers, even if it happens unintentionally. It can negatively affect your insurability both now and down the road. 

While each company has its own policies, just a few missed insurance payments can lead to cancellation, which can cause your rates to rise sharply. For example, one cancellation may increase your car insurance premium by about 30%, and two cancellations could lead to twice that amount compared to someone with a consistent payment history. 

Schmidt warns that clients should also be aware of the longer-term consequences of repeated non-payments.  

“For auto insurance, if there are two cancellations for non-payment within the past 36 months, the client may become ineligible for any payment plan and would be required to pay the full premium upfront until they are outside that time frame,’ explains Schmidt  

“And for property insurance, just one cancellation for non-payment within the past 24 months can result in the same restriction.” 

Multiple cancellations can classify you as a high-risk customer, resulting in even higher premiums and making it more difficult to obtain coverage in the future. 

How to avoid missed payments 

To avoid missing an insurance payment, there are several proactive steps you can take. Setting up automatic payments ensures your premiums are paid on time without any extra effort. You can also use payment reminders through your phone and calendar or align your payment schedule with your payday to make budgeting easier. 

“It’s also important to understand that some carriers limit the number of deferrals or payment schedule changes allowed within a policy term. If clients find that their current payment dates are consistently difficult to manage, they should ask to have their regular payment date moved to a more convenient time of the month,” says Schmidt. 

Another smart option is to pay your full annual premium upfront. Many insurers offer a discount (sometimes up to 10%) for doing so, which can save you money over the long term. These simple strategies can help you stay organized, reduce financial stress, and keep your coverage active without interruption. 

Plan ahead

The best course of action if you’re struggling to make your payment is to contact your insurer or broker immediately – they can offer payment deferrals or solutions. By being proactive and understanding the repercussions, you can avoid the worst outcomes of missed payments and ensure continuous protection for your car and home.