Feb 26, 2021
What You Should Know About Cancelling Your Insurance
Do you want to cancel your insurance for your car? Maybe you've found a better price. Are you up for renewal looking to switch insurance companies, but you are not sure what to do next.
The following explains why you may want to switch or cancel your insurance and other considerations to factor into your decision.
Regardless of the reason you are cancelling, you must be discuss it with your insurer. Let's look at why someone may want to cancel and what they need to consider.
Can I Cancel My Insurance?
Did you know that you can cancel your car insurance before it expires? Many policyholders are unclear about the rules around the process. Most assume they can't, but the fact is you can cancel whenever you want to.
Why Do Drivers Cancel Their Insurance?
Here are some common reasons why drivers cancel their insurance :
- Unhappy with how much you are paying : You are unhappy with your current premium and believe you can find a more cost effective option.
- You find a better deal : You decided to shop around and find a lower payment.
- Unhappy with customer service : You are not satisfied with the level of customer service from your insurer.
- You no longer have a vehicle : You’ve decided you no longer need a car and no longer require it.
- Combining households and policies : You’ve decided to combine home and auto insurance with your provider.
How Do You Cancel Insurance?
Cancelling needs to be done the right way to avoid potential issues. Here is what the process looks like :
Check Prices Before You Cancel
Always explore your options before cancelling. Check various providers and identify new options.
Choose A New Company
You can work with your advisor to explore your options. They will examine options from multiple providers and see if you can save with a lower price.
Notify Your Current Insurer Of Intentions To Cancel
Notify your provider of your intentions to cancel once your new provider has your new one is ready. While the process of cancelling varies by company, most require you to provide an insurance cancellation letter.
Even if you are not required to provide a cancellation letter, it is a good idea so you have a record of the date you requested cancellation.
Be open to the idea of your current insurer offering additional discounts or incentives to maintain it.
Make The Switch Without A Gap
Make sure there is not a gap during the transition. The last thing you want to find out is that your new one is not yet active. If there is a gap, you should avoid driving without insurance. If caught, you face fines and serious penalties if you get into an accident.
Can I Cancel My Insurance At Any Time?
There are two main times when people consider cancelling their insurance :
Cancelling On Renewal
Cancelling your current plan upon renewal is common. When it's car insurance renewal time, it's a great opportunity to explore options. It's one of the main ways of cancelling without charges or cancellation fees.
Can You Cancel Mid-Term?
Yes, cancelling before the renewal date is possible.
Even though you can cancel at any time, it may not make sense financially to make the switch. Always factor in the financial impact before you do it.
What Do You Need To Consider Before Cancelling Insurance On Your Vehicle?
Even though you may have found a lower price or you are not satisfied with your current provider, it may not make sense to switch policies once you factor in the following :
Cancelling mid-term could result in cancellation and administrative fees. These fees vary based on the terms and conditions in your agreement. The overall cost to cancel will depend on when you do it. For example, you will pay more in cancellation fees if you cancel in month six versus doing it later in month nine of the term.
Loss Of Current Discounts
One often overlooked factor when switching is your current discounts. If you cancel, you could lose loyalty discounts, accident forgiveness, and other perks and discounts.
Insurers charge administration fees for setting up a new one. You may also be required to pay a down payment. In addition to your cancellation fees and potential loss of discounts, these upfront costs need to be factored into your decision to switch providers.
Use The Short-rate Cancellation Table To Determine Cost To Cancel
Using a cancellation calculator or short-rate cancellation table is a great way to estimate the costs to cancel. The table will provide you with an estimated cost based on :
- Type of coverage : Are you looking to cancel only your auto policy or are there other types?
- Premium : How much do you pay currently?
- Term length : When does the current one expire?
- New start date : When do you want to begin your new plan?
Your provider or insurance advisor can help determine the cost to cancel.
Do I Get A Refund If I Cancel My Insurance?
A cancellation refund will be provided if you paid your premiums annually in advance. Cancelling monthly policies will require you to pay the fee or penalty.
There are two ways companies calculate your refund :
Pro-rated Cancellation Refund
You are refunded the total amount of the premium you did not use. For example, if you had four months remaining, you will be refunded a pro-rated amount for that time. Cancellation fees may be deducted from your pro-rated refund amount.
Short-rate Cancellation Refund
Your provider takes out a cancellation penalty fee from your refund for cancelling early.
Make sure you know which method your company uses when considering your options. These fees are generally between 2-7% of your premium.
Cancelling Insurance FAQs
According to the Financial Services Commission of Ontario:
"The Statutory Conditions in the Ontario Automobile Policy (OAP 1) state that an insurer may use a short-rate cancellation table when an insured requests a cancellation. This cancellation table takes into account administrative or handling costs involved with issuing and cancelling it before the expiry of the term."
Learn more about these forms and enhancements by reading our OPCF artilce.
Yes. It’s possible to cancel with an open claim, but you will still need to complete the claim. You may also be subject to a cancellation fee.
Yes, they can cancel it for payment or collections reasons. Avoid allowing it lapse by not fully paying or missing payments. This is not a risk worth taking. Non-payment gives your insurer the right to terminate since you didn't pay. If you are cancelled for non-payment and need high-risk auto insurance and see your costs increase.
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