Car Insurance Cancellation

Your guide to the information required for auto insurance cancellation.

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Insurance protects you and your assets. Before making the decision to cancel your insurance, it’s crucial to consider the potential risks and ensure you have adequate coverage elsewhere. It’s about finding the right balance between cost and coverage.

But if you do need to cancel your insurance, here’s what you should know.

Why you may want to cancel your insurance policy

There are several reasons why you might consider cancelling your auto insurance. While the decision should not be taken lightly, there are some circumstances that could lead to such a choice.

Relocation: If you’re moving to a new province or country, your current insurance policy may not be applicable or the best fit for your new location. Different regions have varying insurance requirements and premiums, so it’s worth exploring local options.

Finding a better deal: Insurance is a competitive market. If you find another insurance company offering similar coverage at a lower rate, it might be time to make a switch. Remember, cheaper isn’t always better - make sure the new policy meets all your needs.

Selling your vehicle: If you’re selling your car, you won’t need your current car insurance policy. Make sure to inform your insurance company about the sale to avoid paying unnecessary premiums.

Downsizing: If you’re downsizing and no longer using your car as frequently, or at all, cancelling your car insurance could be a viable option. You might also consider switching to a usage-based insurance model if you’re using your vehicle less frequently.

Policy dissatisfaction: If you’re unhappy with the service provided by your insurance company, whether it’s poor customer service or dissatisfaction with the handling of a claim, you might consider looking for a new provider.

Related: These are the top five factors that influence your auto insurance rate

Do you need insurance for a car you own but don't use?

In Canada, it’s required by law to have insurance for every vehicle registered in the province. This means that even if you don’t use your car, as long as it’s registered, it must be insured.

The minimum auto insurance required in Ontario includes third-party liability coverage, accident benefits coverage, uninsured automobile coverage, and direct compensation-property damage coverage.

However, if you’re not using your car and want to avoid paying insurance, you could consider de-registering your vehicle. Once a vehicle is de-registered, it no longer needs to be insured. But you cannot legally drive a de-registered vehicle. If you decide to use the car again in the future, you’ll need to re-register and insure it before you can drive.

Look into comprehensive insurance

If you’re not using your car for an extended period, you can take off the road, liability and accident benefits insurance in Ontario. By keeping just your comprehensive coverage, you will have coverage for things like fire or theft while your car is stored. Since it doesn’t include collision or liability coverage, you can’t drive the car and won’t be covered for damages from any collisions.

Related: Moving abroad? Here’s how car insurance works

How to cancel your car insurance

Cancelling your car insurance might seem daunting, but it can be as simple as picking up the phone. Here’s a guide to help you navigate the process:

  1. Initiate the process: The first step towards cancelling your car insurance is to get in touch with your insurance provider or agent. A simple phone call is often sufficient to initiate the cancellation or halt the renewal of your policy.
  2. Understand the terms: Be aware that some insurance companies might ask for a cancellation fee and require you to fill out an insurance cancellation form or letter. If you’re nearing the end of your policy term, consider waiting it out and opting not to renew to sidestep the cancellation fee.
  3. Cancellation timeline: When planning to cancel your auto insurance, it’s important to verify the cancellation timeline. Some insurers might necessitate a 30-day notice period to cancel your car insurance without incurring a penalty.
  4. Confirmation is key: Once your cancellation request has been processed, ensure you receive confirmation of your policy cancellation. This serves as proof that your policy has been successfully cancelled.
  5. Refund queries: If you’ve paid your premiums in advance, inquire about the possibility of a prorated refund. Alternatively, you could check if these prepayments can be utilized to offset any cancellation fee.

Remember, every step you take towards cancelling your car insurance should be well-informed and deliberate. Always consult with a professional if you’re unsure.

What you need to cancel your policy

Here’s what you’ll need to have with you when cancelling your policy:

  1. Personal information including name, date of birth and social insurance number (SIN)
  2. New insurance details, including provider, policy number and effective date
  3. Proof of plate forfeiture or bill of sale if you’re getting rid of your car

Can you cancel your insurance coverage at any time of the year?

Yes, you can. While it’s best to cancel during your renewal period to avoid any cancellation fees, you must communicate a desired end date for your insurance policy when cancelling your coverage at any time of the year.

Cooling off period

Canada has a ‘cooling-off’ period for insurance policies, protected under the Consumer Protection Act in Ontario. This is a specific number of days during which you can cancel an agreement without reason or penalty.

This period typically starts from the date of purchase of the policy and often lasts for 10-14 days. If you cancel the policy during this time, you will get a refund of your premium. While this doesn’t provide much leeway if you’re in the middle of your policy, if you’re a new policyholder and you’ve changed your mind, this can be a non-committal option to take advantage of.

Here’s how it’s covered in different provinces across Canada:

Alberta: The Fair Trading Act allows for a 10-day cooling-off period for certain types of contracts.

British Columbia: The Business Practices and Consumer Protection Act provides a cooling-off period that varies from 10 days to one year, depending on the type of contract.

Quebec: The Consumer Protection Act allows for a cooling-off period of up to 10 days for certain contracts.

Manitoba: The Consumer Protection Act provides a cooling-off period of 15 days for direct sales contracts.

These are general guidelines, and the specifics can vary depending on the type of contract and other factors.

What to expect after you cancel your car insurance

Cancelling an insurance policy is a significant decision that can have various implications. Here’s what you can expect after you’ve cancelled your policy:

Refund of premiums: If you’ve paid your premiums in advance, you may be eligible for a prorated refund, depending on the terms of your policy and the time of cancellation. However, some insurance companies may charge a cancellation fee, which could be deducted from your refund.

Insurance coverage: Once your policy is cancelled, your insurance coverage will cease. This means you won’t be covered for any incidents that occur after the cancellation date. If you’re switching to a new provider, ensure your new policy starts before your old one ends to avoid a lapse in coverage.

Impact on future policies: Some insurers may view policy cancellation as a risk factor, which could affect your premiums or eligibility for coverage in the future.

Related: Should you pay your insurance premiums annually or monthly?

Can you cancel your policy if you've made a claim?

Yes, you can cancel your insurance policy even if you have an open claim. However, the specifics can depend on the terms and conditions of your insurance provider.

For instance, if you’ve filed a claim and received money for repairs, but used that money for something else, your insurer may cancel your insurance. In most cases, you would need to provide proof that the repairs have been completed, such as photos of the repairs or contractor invoices.

Making a claim may increase your premiums in the future or when you renew or change your policy. If the amount of your claim is only slightly more than your deductible, you might want to consider if it’s worth it to pay for the loss or event yourself.

Related: How will a claim affect your auto insurance rate?

Cancelling insurance on a financed or leased car

While you can cancel the insurance on a leased/financed car, if you have a loan on your car, your lender may require you to carry certain types of insurance (like collision and comprehensive coverage) as part of the loan agreement.

If you cancel your insurance without having a new policy in place, you could be in violation of your loan agreement, which could have serious consequences.

Related: Do you have the right insurance coverage for your leased car?

Cancelling car insurance without charges

Whether or not you’ll be charged for cancelling your policy largely depends on the terms and conditions set by your insurance provider.

Refunds on short-rated and pro-rated policies

When it comes to refunds after cancelling your policy, insurance companies typically calculate them in one of two ways: short-rated or pro-rated.

Short-rated cancellation: The insurance company charges a penalty for cancelling your policy before the end of the term. The penalty often decreases the closer you are to the end of the policy term.

Pro-rated cancellation: In a pro-rated cancellation, the insurance company will refund you the unused portion of your premium, without any penalties. This means if you’ve paid for a year in advance and cancel six months in, you’d get half of your premium back.

Not all insurance companies offer pro-rated cancellations, and some may charge a small administrative fee.

Alternatives to cancelling your car insurance

Juggling fixed payment priorities like rent, mortgage payments, car loans can be hard when faced with inflationary pressures and higher costs of living. If your insurance premiums are no longer affordable, there are measures you can take to reduce costs instead of cancelling your coverage entirely.

Read more: How much do you need to make to afford a used car in Ontario?

We talked about switching to usage-based coverage, comprehensive insurance for stored cars, and shopping for competitive deals for your insurance already. If you’ve exhausted these opportunities already, you can also consider the following alternatives that may better fit your needs:

Increase your deductible: A deductible is the amount you pay out of pocket before your insurance coverage kicks in. If you’re looking to lower your premiums, consider increasing your deductibles. However, keep in mind that this means you’ll have to pay more in the event of a claim.

Adjust your coverage: For example, if your car is older, you might not need comprehensive or collision coverage. You can also consider decreasing your third-party liability coverage to the minimum requirement. For instance, you’re only required to have $50,000 in liability in Quebec, and a minimum of $200,000 across other provinces. This is cheaper than the coverage you likely have now, which is up to one million.

Opt for pay-as-you-go coverage: With pay-as-you-go insurance, you only pay for a set number of kilometres per year, starting at 1,000, and going up to a limit of 12,000 kilometres. Distance driven is tracked by a telematic device installed in your vehicle.

Look for discounts: Many insurance companies offer discounts for various reasons, such as bundling multiple policies with the same company, being a safe driver, or installing winter tires and anti-theft devices in your car. Check with your insurance provider to see if you’re eligible for any discounts.

Read next: What is one-way car insurance?

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