What is time on risk?

8 minute read Published on Dec 10, 2023 by BrokerLink Communications

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If you have any type of insurance policy, whether it be a car insurance plan or a business insurance plan, then you may have heard the term time on risk. Below, the BrokerLink team explains what time on risk is and how it works in the insurance industry.

Time on risk defined

Time on risk is a term that refers to the period of time between when you made your last monthly insurance payment and when your policy is officially cancelled. In the case of an annual policy, it is the period of time between the yearly renewal date of your policy and the date that it is cancelled. Customers are required to pay the cost of the coverage they received during this time period since they were still covered by their policy.

When you begin an insurance policy you will enter a contract with the insurance company, therefore if you or the insurance company cancels your policy, time on risk applies. There are many reasons that an insurer may cancel your policy, which we go into below.

Please note that the insurance company will calculate how much you owe during the time on risk period. Time on risk periods will apply no matter what type of insurance policy is cancelled, from a motorcycle insurance policy to a home insurance policy.

Why an insurance company may cancel your policy

As mentioned above, a time on risk only applies if your insurance policy is cancelled. Therefore, it’s important to understand why an insurance company could cancel your policy. Just as you, the customer, are within your rights to cancel your insurance plan at any time, an insurance company also has rights.

They are allowed to cancel a policyholder’s coverage for many reasons, ranging from non-payment to fraud and misrepresentation. We run through a few of the most common reasons that an insurance company may cancel your policy below, any of which could kickstart a time on risk period that you need to pay for:

You stop making your insurance payments

One of the most common reasons that an insurer may cancel a policyholder’s coverage is because they have stopped making their insurance payments. This is known as non-payment. If you fail to pay your insurance bills on time, the insurance company is within its rights to cancel your policy.

Please note that even one missed payment could be grounds for policy cancellation, which is why it’s so important to always pay your insurance bills on time. If you fail to make a payment, your insurance company will usually contact you before cancelling your coverage. They will send you a warning, letting you know that the payment has been missed and providing you with a deadline that you must make payment by. If you do not pay by the deadline, then the insurance provider will cancel your coverage.

If you are at risk of non-payment, get in touch with your insurer as soon as possible. It might be surprising, but many insurance companies are willing to work out alternate payment plans with policyholders who have fallen behind on their payments. The last thing you want is for your policy to be cancelled for this reason, as there are many serious consequences that may come with cancelled coverage.

For example, a cancelled policy goes on your insurance record, which all insurance companies have access to. This will make it difficult to obtain car insurance in the future, and if you are able to do so, your premium is likely to be much higher. In addition, you may be forced to purchase an annual policy, meaning you would have to pay the entire cost of the policy upfront.

It is also worth noting that you are unlikely to receive coverage if you have an outstanding balance at your previous insurance company. This includes money owed for time on risk. Thus, you will need to settle all debts if you want to have any hope of obtaining a new car insurance policy after a cancelled policy.

You misrepresent yourself to your insurance company

Misrepresentation is a second reason that your insurance company might cancel your policy. Misrepresentation is when a policyholder misrepresents themselves by lying or intentionally withholding certain valuable information when buying car insurance coverage.

Common examples of ways that policyholders misrepresent themselves are by stating that they live at a different address than they actually do or stating that they are the only driver on a car insurance policy when in fact there are several other drivers who should be added to the policy.

Why would a policyholder misrepresent themselves? In an attempt to get a cheaper premium. However, this is never a smart idea, as if the insurance company finds out that you misrepresented yourself, they will cancel your coverage. Even if you accidentally misrepresent yourself, such as by forgetting to tell your insurer that your adult child is now driving your car regularly, this could still have negative repercussions.

Always notify your insurance company about any changes to your situation, whether you move homes, buy a new car or anything else that might constitute a change in risk.

You file a fraudulent insurance claim

Fraud is a third reason that your policy could be cancelled by an insurance company. Similar to misrepresentation, if you make a false or fraudulent insurance claim, your policy could be cancelled. At the very least, you will have trouble renewing car insurance coverage, and if you have anexpired car insurance renewal, obtaining coverage can be extremely difficult.

You have a change in situation and fail to notify your provider

If your situation changes significantly or you have what is known as a material change in risk, your insurance company could decide to cancel your policy, especially if you fail to notify them of this change.

An example of a material change in risk is if you are diagnosed with an illness that hinders your ability to drive.

You file too many insurance claims

Filing too many insurance claims may not all lead to higher rates, it could also lead to a cancelled policy. You always want to avoid filing unnecessary claims, as well as filing a higher number of claims in a short time period.

To avoid needing to file too many car insurance claims, read through these safe driving tips. The safer you drive, the less likely you are to get into an accident and need to file a claim.

You choose to drive even though your licence is suspended

This reason for a policy cancellation is specific to car insurance. If you currently do not have a valid driver’s licence, especially if the reason for this is that it was suspended, and you choose to drive anyway, your insurance company could cancel your policy.

Driver’s licences could be suspended for a variety of reasons, such as earning too many demerit points or being convicted of careless or impaired driving.

You modify your car without telling your insurance provider

Believe it or not, vehicle modifications that are not approved by our insurance company could result in a cancelled policy. Insurers have strict rules surrounding car modifications, with certain types of modifications automatically resulting in cancelled policies.

So if you plan to modify your vehicle in any way, be sure to contact your insurance provider to find out if you are allowed to do so. If you decide to proceed with a modification that your insurer doesn’t cover and they find out, they could cancel your policy.

You are caught and charged with impaired driving

Impaired driving is a criminal offence under the Criminal Code of Canada. If you are caught and charged with driving under the influence of alcohol or drugs, whether it results in a collision or not, your insurance company could cancel your policy.

How to avoid having your insurance policy cancelled

If you don’t want to be on the hook for paying time on risk, then you must do everything in your power to ensure your insurance policy does not get cancelled. Below is a list of tips to help you avoid having your coverage cancelled:

Be honest when applying for coverage and submitting insurance claims

Being honest is crucial when it comes to insurance. Whether you are applying for collision car coverage or are filing a claim under the accident forgiveness portion of your policy, you should always tell the truth. Otherwise, you could be accused of misrepresentation or fraud, which will lead to a cancelled policy.

As mentioned previously, it is important to be honest not only when you are first applying for insurance but also if there are any changes to your situation.

For instance, with car insurance, if there is a change in any of the following categories, you should notify your insurance provider as soon as possible: your home address, job, the type of car you drive, where you park your car, how frequently you drive, how long your commute is, your annual mileage, the drivers who regularly drive your car, vehicle modifications, and how you use your vehicle, whether for business or personal use or both.

Pay your insurance bills on time

Since non-payment is one of the most common reasons for a cancelled policy, thus initiating the time on risk period, if you want to avoid this, it’s vital that you pay your insurance bills on time. Making your monthly payments is a surefire way to avoid having your coverage cancelled.

A tip to help you make your payments on time is to set monthly reminders on your computer or smartphone. You can also opt for an annual payment plan so that you only have to keep track of one payment date.

That said, you will have to pay for your policy upfront, which may not be feasible for everyone. If you know your monthly payment deadlines but are having trouble keeping up with payments due to financial reasons, contact your insurance provider as soon as possible. Let the insurance agent know about the financial issues you’re having and see if you can work out an alternative arrangement.

Work with an insurance broker to find an affordable policy

Another tip to avoid having your policy cancelled due to non-payment is to work with an insurance broker to help you find coverage. Insurance brokers specialize in getting the most competitive rates for their customers. So if you choose to purchase insurance through a broker, you are far more likely to find an affordable policy.

Why is this the case? Insurance advisors at BrokerLink compare rates by contacting multiple insurance providers and obtaining quotes from each. They also unlock discounts on your behalf and offer tips on strategies you can employ to save you money on insurance.

Plus, as insurance experts, they can give you their professional opinion on which types of auto insurance are worth your time and which are not. For example, if your car is not very valuable, they might not recommend comprehensive car coverage. Reach out to BrokerLink to learn more about services today.

Get in touch with BrokerLink to learn more about time on risk

If you want to learn more about how time on risk works in insurance and what you can do to avoid having your policy cancelled, get in touch with BrokerLink. We have the resources and expertise to ensure you get the most out of your coverage. We can also give you advice on the best coverage for your needs, like accident benefits coverage for car insurance. Reach out to us today to request a free insurance quote.