Staying current with payments is an essential part of protecting yourself and your assets. However, life can throw unexpected challenges our way and a missed insurance payment can happen. It’s important to grasp the consequences of these situations and what may occur if your policy is canceled due to non-payment. Below, we’ll explore the potential implications of cancellation and offer some tips on how to prevent it.
Is a missed insurance payment a big deal?
Sometimes a payment can get overlooked amid paying other bills, moving money from account to account, as well as other factors. As soon as you notice an issue with a payment, you should immediately contact your insurer to address the missed payment.
Even one late payment, intentional or not, can cause your insurer to raise your rates or choose not to renew you – so yes, a missed insurance payment can be a big deal, especially if you don’t handle the situation promptly.
What to do if you can’t afford or miss a car insurance payment
Not being able to pay a bill or forgetting to make a payment can be stressful. But it happens. If you find yourself in this situation, you need to be proactive and take steps to rectify the situation as quickly as possible. Below are some actions to take based on your situation:
- If the payment is not due yet: If you can’t pay your auto insurance premium, tell your insurer (or broker/agent) as soon as possible. You may be able to negotiate a new payment plan and avoid cancellation or they may even extend the deadline temporarily.
- If you missed the payment by a few days: Notify your insurance company as soon as you realize your mistake. Some insurance companies do provide a grace period if you miss a payment, especially if this is the first time. A late fee may apply. However, if you are consistently late with your payments, your insurer may cancel your policy or request alternative payment arrangements. Contact your insurer to learn if they have a grace period and their policies on late fees.
- If your policy has been cancelled: Failure to pay by a notice or deadline will result in cancellation. Typically, when you receive a notice in the mail the insurer will provide a very specific date and time of when the payment needs to be received if they are allowing reinstatement of your policy.
Note: Insurers will specify the legal cancellation date and usually this date/time ends at 12:01am.
How do missed payments or cancellations affect my insurance?
Failure to make a payment or getting cancelled for non-payment can affect your car insurance in a number of important ways. Here are some reasons to never overlook the importance of paying on time :
- Cancellation: Your insurance policy may get cancelled for non-payment and you could have a lapse in insurance. Both of these may impact your insurance rates and even your insurability.
- Increased Costs: You could face a premium increase when garnering a new insurance policy.
- Insurance History: Non-payment will be noted on your insurance history and insurers will use this information to rate your policy and to determine your eligibility to be insured with them.
- Additional Fees: Late payment or non-sufficient funds (NSF) fees may be charged by the company and you may face other administrative fees.
- Payments: You may be required to pay your premiums up front in 3- or 6-month terms or even a complete full year term.
Don’t forget that even if you have been cancelled and you switch to a new insurer, the cancellation will remain on your insurance history and could impact your ability to get insured in the future.
What is the impact of a non-payment on insurance?
A non-payment is taken very seriously by insurance companies. Even if you don’t mean to miss a payment, it can still impact your insurability now and in the future.
While every company has different rules regarding a non-payment, sometimes all it takes is a couple of missed payments to result in cancellation. This can make it more difficult for you to get insured, and you may need high-risk insurance, which typically means paying more.
What to do if your insurance is cancelled for non-payment
Getting insurance after a cancellation for non-payment can be a challenge. A recent or previous cancellation due to payment issues may create a gap in your coverage, and new insurers will want to know why you have a gap.
You are required to disclose the reason for any previous cancellations. If you fail to advise an insurer during the application process, they will have grounds to cancel you for misrepresentation and this could affect your insurability for up to ten years into the future, depending on where you live.
If your policy has been cancelled, your best option is to work with an advisor to see where you can get insured and find the most affordable price.
How long does being cancelled for non-payment stay on your insurance history?
The amount of time a cancelled for non-payment stays on your insurance will depend on a few things:
- Whether or not you remain with the same insurance company.
- If you have switched to a new provider after the non-payment cancellation
- The number of times you have been cancelled for non-payment.
Most insurers go back 3 years to see if you have been cancelled for non-payment. Others may go back 6 and some look as far back as 10 years.
It will impact your insurance short-term; and it could impact you long-term, even when you switch to a new provider.
Tips to prevent your insurance from getting cancelled
- Pay Annually: You can pay your full annual premium up front. Most companies offer discount for doing so and you could save up to 10%.
- Monthly Payment Reminders: Set a reminder in your phone to make your monthly payment.
- Auto Payments: Set up automatic withdrawals or payment from your bank account or credit card. Note: If you pay by credit card, be alert about when your credit card expires, if your card is expired that can result in a cancellation.
- Account Balance: Have a buffer in your account to ensure you have enough money for payment.
- Shop: Shop around and compare car insurance quotes to find a rate that meets your needs and budget.
Getting insurance after being cancelled for non-payment
People miss payments. Sometimes it slips our mind, we forget to make a payment until after the due date, there is an issue with our automatic withdrawal, we change bank accounts and forget to notify our insurer, or something happens in our lives that prevents us from making that insurance payment.
While missing a payment on your phone or cable bill may not have severe repercussions, non-payment of insurance can quickly land you in some hot water with your insurer and your insurance may be cancelled for non-payment. This could lead to more expensive coverage or challenges getting insured.
If your insurer has cancelled you for non-payment and you believe they did not follow the Insurance Act guidelines and you have unsuccessfully appealed the decision through their internal complaints process, you can submit a complaint to us for an additional review here.
Photo: Elisa Ventur