Can you miss a car insurance payment? A complete guide

A missed car insurance payment can happen to anyone. Maybe you had a busy week at work, or had an unexpected payment come up that drained your bank account. Whatever it may be, if you missed a payment, you're probably wondering, "what happens next?"

In Canada, a missed car insurance payment can have some serious consequences, depending on who your insurance company is, which province you live in, and how quickly you act. You'd be surprised to know that a lot of drivers seem to think there's an automatic grace period or cushion when, in reality, the rules can vary. While some providers may give you some leeway, other insurers may cancel your insurance coverage altogether.

In this guide, we’ll break down what counts as a missed payment, how grace periods work across provinces, how a lapse in coverage could affect your credit score or insurance history, what to do if your policy gets cancelled, and more. You’ll also learn how to avoid premium hikes and prevent this from happening again.

What counts as a missed payment?

A missed payment isn't always a flat-out-non-payment. The way insurance companies see things, a missed payment can mean the following:

• Partial payments that fall below the amount due.

• Bounced transactions due to insufficient funds (NSF fees) in your bank account or on a pre-authorized debit.

• Late payments are made after your due date, even if only by a few days.

As you may already know, insurance providers bill monthly or annually. If you’re on a monthly plan and your payment doesn’t go through on the payment date, your insurer may send you a notice of missed payment. Grace periods will vary between providers, but missing a payment outside of this period can lead to a policy cancellation. Additionally, it's important to note that a pattern of missed payments can affect your overall standing with your provider, even if your policy is never cancelled.

Legal & financial consequences by province

Consequences of missed payments will vary by province. Here's a closer breakdown below:

Grace period details

A grace period is a short time window following a missed auto insurance payment during which your car insurance coverage remains active. This window gives you time to settle your overdue payment without facing an immediate cancellation. That said, because auto insurance is regulated provincially, grace periods will vary depending on your province and insurance provider.

During this period, you'll still technically be insured, but some providers may suspend certain policies until you've paid your premium entirely. For example, if your vehicle is damaged while parked in a public lot, you may not be eligible to claim damages. Your policy may also be flagged as pending cancellation.

One thing to note is that car insurance companies are legally required to notify you that your car insurance payment date has passed by issuing a Notice of Cancellation before you have your policy cancelled. Never assume that your car insurance is valid during this window; always confirm with your insurer and make your insurance payment immediately. You may be able to reschedule your monthly payment without any penalties. For example, in British Columbia, ICBC allows customers to push their insurance payment back by 60 days one time.

Impact on credit rating and insurance record

Missing an auto insurance payment can do more than disrupt your coverage. It can also impact your insurance history and credit score. Here's a closer look at how:

Credit ratings and missed monthly payments

Most car insurance companies don't report late payments directly to credit bureaus. However, if you miss a payment, your provider may send your payment to collections, which can happen if the amount remains unpaid for a long period. In this case, your non-payment would be listed on your credit report, which in turn can negatively impact your credit score.

Future insurance rates

Insurance providers keep track of your payment history and may consider frequent missed or late payments a sign of risk. Even if your policy isn’t cancelled, one or more late payments could result in the following:

• Higher insurance premiums due to you being labelled a high-risk client.

• Limit your ability to access a payment plan.

• Make it more difficult for you to get a new provider.

• Limit your access to insurance discounts.

If your non-payment leads to a cancellation, your car insurance history will reflect this information, which will be available to all future providers. Think of it like a bad report card. Even if you're no longer facing financial difficulties and are committed to making on-time payments, it may still result in more expensive monthly insurance rates for up to three years.

Step-by-step recovery guide to missed insurance payments

If you've missed your monthly payment for car insurance, don't panic. Here's what you need to do:

Check your auto insurance policy documents

A lot of insurance policies include a grace period in which you can make missed payments without facing immediate repercussions, such as policy cancellation. Check the policy papers for the length of this grace period.

Contact your insurance company or insurance broker

Contact your insurance company or broker as soon as possible. It is critical to communicate as quickly as possible. Inform them of the late payment and the explanation for the delay. In certain instances, they may be willing to collaborate with you to solve the problem.

Pay your insurance bill

As soon as possible, make the overlooked payment to bring the account up to date. Make sure you pay any late charges or penalties that may be imposed. If you are having ongoing problems with money, talk to your insurance company about alternatives. They may offer instalment plans or changes to your coverage in order to make it less expensive.

Important reminder!!

In the event your missed car insurance payments have led to a policy cancellation, do not drive until you’ve secured new coverage. Driving without insurance is illegal in every Canadian province and can result in fines, licence suspension, or vehicle impoundment.

What if your provider cancels your policy altogether?

So your policy was cancelled, what now? Getting car insurance after a cancelled policy can sometimes be more complicated than it may appear to be. Even if you don't qualify for standard car insurance, you can purchase high-risk policies with certain insurers.

What happens after a cancellation

Remember, once your insurance policy is cancelled, your coverage will end at the time and date that's outlined in your insurer’s notice of cancellation. From that point forward, you are no longer insured, meaning any driving you do may result in fines, vehicle impoundment, licence suspension, and financial liabilities in the event of an accident. Additionally, the cancellation will be recorded in your insurance history, which could label you as a high-risk driver, making it more difficult for you to find affordable insurance premiums.

How to get reinsured

To get reinsured as soon as possible, you'll need to:

1. Consult a broker

Seek advice from independent brokers who can provide valuable insight into your insurance options. These insurance experts have access to a wide range of insurers and can assist you in navigating the complexities of obtaining coverage.

2. Gather your documents

Have your notice of cancellation, driver's licence, vehicle registration, and proof of past payments handy.

3. Prepare to pay more

Most insurance companies will charge you more for your future coverage and/or require that you pay for your coverage upfront, rather than through a payment plan. Note that if you are unable to obtain a standard car insurance policy, high-risk or specialized firms like the Facility Association may still provide coverage options tailored to your specific needs.

The Facility Association, a government institution assigned to guarantee that all drivers have a means of getting mandatory insurance coverage for their vehicle(s). However, it is essential to note that the Facility Association does not directly issue high-risk policies. These policies are instead made available through various auto insurance companies.

Can you reinstate your coverage after a non-payment?

It depends on the insurance company. If the cancellation is recent and you settle the payment quickly, your insurer may agree to reinstate your policy. However, they may charge a fee.

How much more will it cost if you miss a payment?

Missing an insurance payment or having your policy cancelled as a result can lead to significant increases in costs, both short-term and long-term. Let's take a closer look:

Short-term costs

In the event your company allows you to reinstate your insurance coverage, prepare to pay for:

• You missed premium payment.

• A non-payment administration fee that can range between $20 and $100.

• A possible reinstatement fee between $50 and $150, depending on the insurer.

If a reinstatement isn't possible, you may lose discounts with your new provider and the option of paying over time. Rather, you'd need to pay in advance to ensure you don't miss future payments.

Long-term costs

A payment-related cancellation can result in you being labelled as a higher-risk customer, resulting in a premium increase of 10 to 30% at the time you're up for a renewal or when you change providers. If standard companies refuse to insure you, you will need to buy coverage through the Facility Association, which can increase your premiums by 50% or more.

In addition, if you default on a payment, it will stay on your insurance history for up to 3 years, which could impact your ability to find affordable coverage. Ultimately, if you're struggling to afford your premium, talk to your broker before a payment is missed. They may be able to help you figure out different payment options so you can avoid cancellation.

Preventing future missed payments

The best way to avoid missed payments and lower your stress levels is to set up precautionary measures that keep you on track. Whether you're managing a tight budget or have multiple monthly payments to make, like an auto loan, these tips can make a world of difference:

Set up payment reminders

Consider setting up payment reminders on your phone a few days before each payment is due. This can help you manage your monthly expenses and avoid non-payments that impact your insurance rates in the future. You may even have the option of setting up reminders through your insurer directly. Make sure to ask whether this tool is available!

Use automatic payments with your credit card or bank account

Most insurers allow customers to set up automatic withdrawals from their bank accounts or credit cards. This eliminates the risk of forgetting your bill due date. Just make sure you have enough money in your account each month to avoid NSF and late fees.

Switch to annual payments instead of a monthly payment schedule

If you're in the financial position to do so, consider paying for your auto insurance upfront, rather than monthly. Not only does this prevent you from a non-payment, but it can also qualify you for an insurance discount.

Set aside a financial buffer

Think about saving money on the side. Realistically, you should set aside one or two months’ worth of premiums in a savings account. This can help you cover a payment in case of an emergency or unexpected expense.

What happens if your car insurance lapses in Canada?

If your coverage lapses in Canada, your insurance will stop immediately. Remember, driving without insurance in Canada is illegal and can lead to fines and other consequences.

Common questions regarding car insurance payments

The following questions are worth considering:

How many car insurance payments can you miss before cancellation?

Typically, following your first non-payment, your provider will wait until the grace period has ended before issuing a notice of cancellation.

Can a missed payment affect your credit score?

Yes, if your non-payment is sent to collections, it will be recorded on your credit report and noted on your insurance history. As a result, your credit score will increase, and you can expect your premiums to increase the next time you're up for a renewal as well.

Is there a penalty for late car insurance payments in Ontario?

Yes, you may be subject to late fees, a reinstatement fee if your policy is cancelled, a driver's licence suspension, and other penalties.

Does a missed payment increase your insurance premium?

Oftentimes, yes, it will. Non-payments are viewed as high-risk behaviours. Your insurance company will then need to rate your higher risk profile accordingly.

How long do missed insurance payments stay on your record?

Missed payments will stay on your insurance record for up to three years, depending on who your insurance company is and how severe the lapse in coverage was.

Can you reinstate a cancelled car insurance policy?

Yes, you can reinstate a cancelled car insurance policy if your payment is made quickly. Some insurers may require you to reapply for coverage or refuse to reinstate your policy entirely.

The bottom line

A missed payment can feel like a small oversight, but it can ultimately lead to serious consequences. From higher premiums to legal risks that result from coverage lapses, staying on top of your payment schedule is imperative, especially seeing as driving without insurance is illegal in Canada. Whether you have more questions about missed payments or have other questions or concerns, the experienced team at BrokerLink is here to help.

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