There was a recent article in the Toronto Star about a lady who had her auto insurance canceled and now is paying $700 a month instead of the $140 a month that she used to pay.
It's important to know and understand the reasons why insurance companies can cancel your coverage so that you can save yourself a headache later on down the road.
So, let's get into it and go over all of them in detail.
#1. Failure to make payments.
This can have serious consequences. If you don't stay current on your premiums, the insurance company will not only cancel your coverage, but they'll also report it to the credit bureau.
This is major, as it could immediately and negatively impact your credit score.
If you have a new credit card or banking information, please contact your broker or agent right away because a non-payment is not a good reflection on your reports.
People are getting penalized for non-payment cancellations from prior carrier. Going to a new carrier may not necessarily mean cheaper premium with that on your record.
# 2. Lying on your insurance application.
Accuracy is very important when it comes to auto insurance and application submission. Lying on the application can result in quick action by the insurer and a cancellation of coverage.
Furthermore, this dishonesty can even lead to legal consequences depending on the scope and intended outcome. Do not take Applicant Fraud lightly; be diligent in noting applicable information properly and verify that all details are accurate prior to the company signing off. It is certainly better to suffer minor additional steps than face heavy administrative penalties caused by wrong doing.
Here’s an example of a intended lie:
A client tells me that they had insurance for the last 5 years but their autoplus report tells me they don’t.
I ask the client to retrieve from their old broker or agent for a “Letter of Experience”.
A letter of experience is written by the last carrier confirming the number of years of insurance history, claims in the policy, all the listed drivers and the underwriter’s full name.
I get a PDF document that shows all the details and it looks legit. I submit it with the application. The auto underwriter could simply make one phone call to the old broker/agent to confirm these details that there was 5 years of insurance. This step is called due diligence.
They find out, the letter is a fake because the client just wanted 5 years of insurance history on to save on premiums. Immediately the underwriter will report this offense to the ministry and cancel your insurance for underwriting reasons or worst misrepresentation/fraud. Practically flagging your file for future insurance companies that you have provided false information.
You may have heard people got away with things and this is how they save money but it could also backfire when you get caught and no one wants to sell insurance to you.
I usually tell my clients, do you want insurance or do you want a fake insurance?
No one dares to say ‘I want fake insurance.’ then why would you lie hoping that the coverage will be there when you need it most.
A minor car accident could cost you as little as $30,000. Can you afford to pay it?
If your answer is no, then do not lie on your application.
What if it’s a major accident costing $1 Million, can you afford it then? If the answer is still no, do not lie on your application.
Tell the truth, pay the premium and when the time comes if it’s a minor or major claim, you know you are eligible in other words qualified for the coverage.
Do not lie about:
Where you live. Some people like to give me a far away address like Kitchener to get cheaper insurance but the truth, they live in North York. If your car gets stolen outside your driveway in North York, are you going to tell Police that you parked at a friend’s house on Thursday night? Are you going to lie to an officer at the time of claim? It’s going to catch up to you.
Who you are. Some people like to sign off their wife’s paperwork or husband’s paperwork. Paper trail can show two signatures are not the same.
Experience or Insurance history - this tends to appear on reports. It’s the 21st century.
Do not lie because it’s not going to help you build the trust between a broker and you.
#3. Too many traffic tickets or accidents.
You were honest from the beginning since you contracted with the insurance company but now your circumstances has changed.
Insurance companies are rated based on their appetite on clients. Most of them want people who are conservative, never had accidents or traffic tickets.
We have carriers who deals with high risk clients which means higher premiums.
If you’re looking for good rates then they want to be in the regular market.
Unfortunately a bad year comes along and you might get into traffic tickets and at fault claims.
Typically the first at fault claim should be okay but if added traffic convictions onto your record. That changes your profile. You are no longer a conservative driver. You’re considered a higher risk client.
If that insurance company doesn’t sell to high-risk clientele, they have the right to remove you by giving you a grace period of almost 2 weeks to get another insurance carrier.
Typically, they don’t cancel you without notice unless you have committed a serious offence like driving under the influence or stunt driving which I know your license will be immediately revoked and it takes at least 7 days for reinstatement.
Some cases are so severe that you need to breath into a machine to activate your car engine.
If you are unlicensed, there is no insurance.
You cannot drive the car even if you are paying insurance. You could be paying because your car has a lien or a lease agreement which forces you to keep car insurance until you can sell the car off.
Simply put, good driving is essential if you want to be covered by your insurer in the future.
The more tickets or collisions you encounter, the more likely the insurance company is going to cancel on you.
#4. Driving under the influence.
Operating a vehicle while under the influence of alcohol or illegal substances is an incredibly irresponsible and dangerous action.
Just because Marijuana is legal in Canada, you’re allowed to drive while you’re high. That’s illegal.
Not only is it illegal, but it puts other people on the road in danger of serious injury or tragedy.
If an insurance company finds out that you were driving while impaired, they can and will terminate your policy immediately and not renew coverage in the future.
This means that you won't be able to get car insurance until penalties are resolved—a process that can take weeks to months or longer depending on your province and other contributing factors.
Furthermore, being drunk or impaired driving can carry significant financial burdens in terms of fines, legal fees, increased insurance rates, and potentially even jail time depending on your region.
Being responsible for such losses could easily put you into long term financial difficulty.
Don’t do it.
#5. Not updating your information with the insurance company and ministry of transportation.
Moving to a new area, getting a new car or selling your old car?
Don't forget to inform your insurance broker and ministry of transportation.
This is a requirement by law; you must update your information within 6 days.
If you don't let them know about any changes concerning your auto insurance, such as updating your driver license info, address, or ownership transfer, then your policy could be cancelled and you won't be eligible for future coverage.
These regulations must be followed to guarantee your protection against theft and accidents!
Here’s an example:
You sold your old car to someone who was supposed to take half of the ownership to Service Canada to do an ownership change.
Typically, I always recommend my clients to remove their plates off the car. Do not leave those plates that you own on a car that you plan to sell to a new buyer. They are supposed to get their own new plates. You need to take your half of the ownership to Service Canada with the old plates to declare it’s been sold.
A lot of people do these private transactions and aren’t aware of the steps. The seller forgets to declare that the car was sold. Imagine, when the old car is driving around with no updates and with your old plates.
It gets into an accident, guess whose the first party to be contacted? The new buyer or the old seller? The police will do an investigation using the VIN# of the car, which would trace it back to the last known owner which is yourself.
You would have to prove that you did your due diligence like declaring you sold the car with Service Canada. By law, every vehicle supposed to have their own insurance.
Did you make sure that the new buyer had insurance before allowing them to drive the car off your property? That is why the dealerships make sure you provide proof of insurance before driving off their lot.
Did you go to Ministry of Transportation to return the old plates and declare that you sold it?
Did you tell your insurance broker that you sold the car?
Those are the expectations when getting rid of an old vehicle.
Even if you trade-in the car at a dealership, there’s paper trail with the agreement. It spells out what vehicle is being traded, VIN#, details and pricing. As soon as you’re picking up your car, the old car is no longer in your possession.
It is still your duty to go to ministry of transportation to get rid of your old plates and declare it has been sold then you’re safe from future investigations if that car ended up in a crime scene.
I understand that not many people sell their cars often enough to remember but you have to understand your role as a car owner and when in doubt, google this information or go to Ministry of Transportation and ask questions before it’s too late.
To summarize, here are the 5 reasons insurance company can cancel your auto policy.
Failure to make payments
Lying on your insurance application
Too many traffic tickets or accidents
Driving under the influence.
Not updating your information with the insurance company and Ministry of Transportation.
These are just some of the reasons why an insurance company may choose to cancel your auto insurance policy. Make sure to stay clear of them to keep your insurance premium as low as you can.