Are you looking to cancel your car insurance policy early and want to know if you can and what happens if you do? BrokerLink can help with these answers. Car insurance policies typically last 12 months, but that doesn’t mean you can’t cancel your policy before it expires. Keep reading for more information on how to cancel your car insurance policy early, the possible penalties for doing so, and a step-by-step guide on how to cancel your car insurance.
Reasons to cancel your auto insurance policy early
Drivers might want to cancel their car insurance policies for various reasons. From moving provinces to selling your vehicle, below are a few of the most common reasons drivers in Canada may cancel their auto insurance policies early.
When you move to another province or country
If you move to another province or territory, or another country entirely, your existing insurance company may not offer coverage there. As such, you will need to cancel your existing policy and purchase a new one from an insurance company that offers coverage in your new location. To avoid a lapse in coverage, set up your new car insurance plan at least a few weeks in advance of cancelling your current policy.
When you sell your vehicle
You may wish to cancel your car insurance policy early if you sell your vehicle with no plans to replace it. BrokerLink’s experts recommend maintaining coverage right up until the new owner takes possession and the title has been transferred.
When you want a better deal
Insurance companies are constantly changing their rates. Therefore, you may have originally purchased a policy thinking it was a great deal, only to discover that you can find a much better deal with a different provider. At this point, you may be tempted to cancel your existing policy early and purchase a new policy at a lower rate. If you choose to go this route, make sure your new policy is valid before cancelling your existing coverage. While it’s generally recommended to wait until your existing policy is up for renewal before buying a new one, you may decide you don’t want to wait.
Will I get penalised for cancelling my auto insurance early?
The answer to this question is it depends. The length of time that passes between buying the policy and cancelling it will determine the fees you are required to pay, if any.
Car insurance cancellation fees
Generally speaking, if you cancel your car insurance policy before the end of the policy term, your insurer will usually charge a fee. Car insurance cancellation fees vary by company. Be sure to read the terms of your policy closely, to find out exactly how much you will be charged for cancelling.
Within 14 days
The moment you purchase an auto insurance policy, what is known as the “cooling off” period begins. During this period, which typically lasts 14 days from the date the policy is purchased, you have the right to change your mind and cancel your policy without paying any cancellation fees.
Therefore, if you cancel your car insurance policy within14 days of buying it, you are entitled to a refund. Note that if the policy had already begun, you won’t be fully refunded. Rather, you will be refunded for the cost of the policy, minus any days the policy was active for. (There may also be minor administration fees tacked onto this).
Beyond 14 days
If you choose to cancel your car insurance policy after the 14-day cooling off period but before the end of your policy term, you should be prepared to pay cancellation fees. It’s worth noting that on top of any cancellation fees charged, the insurance company may not refund you the final two months of your policy. For example, if you cancel a policy eight months before the expiration date, you may only be refunded for six months’ worth of payments.
Car insurance refunds
If you cancel your auto insurance policy early, you may be entitled to a refund. However, it is rarely a full refund. If you opted to pay for your policy annually, meaning you paid for all of it upfront, the insurance company may refund the remaining balance, prorated based on the number of days the policy was in effect. However, if you pay for your insurance policy monthly, then you may not get a refund. Further, since cancellation and administration fees will likely be charged, even if you are entitled to a refund, it might not be much once you take into account these additional costs.
It’s important to note that most car insurance policy add-ons are non-refundable. And if you purchased add-ons from another provider, you may have to cancel your coverage with them, as well as your main insurance company.
Other circumstances in which you may not be entitled to a refund are if the insurance company decides to cancel your policy or if you made a claim on the policy.
Finally, if you are entitled to a car insurance refund, insurance companies are not typically obligated to refund your money in a given time period. Some auto insurance contracts stipulate that in the event of a policy cancellation, the company will issue a refund “within a reasonable timeframe.” Since there is no set definition for this, you should be prepared for the process to take a while. For this reason, it’s usually best to wait until your policy is up for renewal to cancel it.
Can I cancel my car insurance if I’ve made a claim?
Yes, you can cancel your car insurance policy if you’ve made a claim. However, the insurance company may not provide you with a refund. On top of that, you may have to pay a cancellation fee. To learn more about cancelling a policy after filing a claim, refer to: how to cancel a car insurance claim.
What happens if I stop making payments without cancelling my car insurance policy?
If you stop making payments without cancelling your car insurance policy, you could face serious consequences. Your insurance company will continue requesting payment from you and charging you for your policy if it remains active.
In addition to affecting your credit rating, failing to notify your insurance company that you want to cancel your car insurance coverage can lead to your insurance company canceling your policy anyway. When an insurance company cancels your policy due to non-payment, it can make it far more difficult to obtain a new policy in the future. Specifically, you will not be able to buy an auto insurance policy on a payment plan from a different insurance company until the balance is paid with your previous company.
Therefore, unless you can afford to pay for a new policy upfront, it will be extremely difficult to find new coverage. An inability to afford coverage ultimately prevents you from legally driving, since car insurance is mandatory throughout Canada. Driving without insurance can lead to fines worth thousands, if not tens of thousands, of dollars, licence suspensions, and even jail time. If you find yourself unable to make car insurance payments, contact your insurance company immediately. Informing your insurer of your predicament can prevent a non-payment cancellation. They may even be willing to work out a revised payment plan that works for you.
How to cancel car insurance early
Should you decide that cancelling your car insurance policy is in your best interests, BrokerLink has put together a guide to doing just that. Check out our step-by-step guide to cancelling auto insurance early in Canada:
- Purchase a new policy before cancelling your existing policy: Auto insurance is mandatory in Canada. So if you are a driver, you never want to be without it. Otherwise, you run the risk of getting caught and facing serious fines. Therefore, if you plan on driving after cancelling your existing policy, make sure you've already purchased a new one that is valid from the date your old coverage ends. A lapse in coverage can have serious consequences.
- Speak with an insurance broker: Before cancelling your existing policy with your insurance company, contact your insurance advisor. They can walk you through the pros and cons of cancelling your policy and offer unbiased advice. They can also help you find a new auto policy that suits your needs and budget.
- Contact your insurance company: To cancel your existing insurance policy, you will need to get in touch with your insurance company if you don’t have a broker. Before submitting your cancellation request, ask your provider for a refresher on the cancellation terms, including any applicable fees. Please note that some providers may require 30 days’ notice for policy cancellations.
- Sign and send a cancellation letter (if applicable): Some auto insurance companies may require you to sign and send a formal letter requesting your coverage to end (this may be digital or by mail). The cancellation letter will likely include your policy number, name, and the date you want your policy to end.
- Wait to receive notice from your auto insurer: Once the cancellation request has been made, your insurance company will likely send a notice confirming that your policy has officially been cancelled.
Contact BrokerLink to get your next insurance policy
BrokerLink’s insurance advisors are experts at finding great car insurance policies at low rates. You can count on us to find a policy that meets your lifestyle and budget. Simply give us a call and then sit back and relax while we compare quotes and unlock discounts on your behalf.
To learn more about finding a new policy, contact BrokerLink today. We can be reached by phone, email, or in person at any one of our locations in Canada. You can also take advantage of our online quote tool and request a free car insurance quote today. All BrokerLink quotes are accurate, competitive, and 100% obligation-free. Plus, they take just minutes to obtain!
So what are you waiting for? Get started with BrokerLink today.
Get an auto insurance quote [phone]