When it’s time to renew your car insurance each year, do you look around for a better deal or simply let it auto-renew? These days, everything seems to cost a lot more than it used to. From food to fuel, we are all looking at ways to save. But who has the time to worry about something that can potentially take care of itself? In this article, we discuss whether or not you should auto-renew your insurance.
Car insurance renewal in a nutshell
Each time your policy is up for renewal, you will receive notice in the mail. It will arrive 45-60 days before the closing date. Standard renewals will be one year from the date it became effective. At the end of the term, you will receive your new policy information for the upcoming term with these possible outcomes:
- Your rates will stay the same
- Or your rates may increase
- The premium may decrease
- Your provider may not renew your insurance
Based off of what your renewal letter contains, you may wish to or may need to switch to another provider.
What is automatic renewal (auto-renew)?
The majority of insurance companies renew policies automatically, provided you maintain a good driving record and make your payments on time. Remember, it’s important to review the updated information, even if your rates stay the same. Being well-informed about the terms of your policy, as well as other options, before accepting the renewal is important.
In Canada, 64% (almost two-thirds) of Canadians allow their car insurance policies to auto-renew.
While automatic renewals are easy and convenient, they can be costing you money – especially if your insurer increases your rate. When it’s time to renew your plan, it is an opportunity to see what other insurers have to offer. A lot can change in a year; you may qualify for new discounts, and you may pay less with another company. Comparing is the single best way to see what the market has to offer. You may be surprised about how much money you can save!
Points to consider before renewing your policy
Renewal time is the perfect opportunity for you to review and re-evaluate your current car insurance policy. Here are some questions you should ask yourself upon renewal time:
- Drivers: Do you need to remove or add an occasional driver to your policy?
- Driver’s history: Speeding tickets, demerit points, and license suspensions will all affect your rates.
- Commuting: How far do you drive each day? Has your daily driving distance changed recently? Do you use your car for work? Have you started using a personal vehicle for work purposes?
- Upgrades: Have you had an anti-theft device, GPS or equipment installed that enhances performance? You may need to increase coverage if you bought a new stereo, auto car starter or other after-market accessories.
- Discounts: Contact your isure representatives to see which ones you may now qualify for.
To learn more about available discounts, please click here.
- Retired: If you are driving less, you may be able to downgrade your policy to “leisure”.
- Winter tires: Ontario insurers offer a small discount if you now have some.
- Moved: Insurance rates are influenced by where you live and the level of risk associated with your neighbourhood (i.e. robberies)
- Private sale: Did you sell your car privately?
- Have your insurance needs changed?: Does it make sense to increase or decrease limits, or add new coverage?
All of these reasons can prompt a change in your car insurance policy.
Should I auto-renew my insurance?
Auto-renewal can be a great time-saving tool. However, you should still go through the scenarios listed above. Each one can influence your rates. Afterwards, you may see that your existing policy is fine as is. If so, unless otherwise instructed by your insurer, you won’t need to take additional action, like manually renewing your insurance policy online or by calling. You can allow your insurance policy to automatically renew. This ensures seamless coverage between the end of your previous policy term into the start of your new term.
You must tell your insurer that you do not want to renew your policy with them before it expires. If you don’t, they’ll automatically renew it for another year and you will have to pay to cancel it.
Drawbacks to auto-renewing your insurance
Part of the reason Canadian drivers allow their car insurance policies to auto-renew is that they find the process of shopping around and applying for a new one time-consuming. Here are some of the drawbacks to auto-renewal, according to Insurance Business Canada:
It can be more costly to auto-renew your insurance
Experts estimate that a person can lose at least a few hundred dollars for failing to shop around for a new policy. In the long run, this can amount to thousands of dollars, especially with car insurance premiums across the country steadily rising as pandemic restrictions ease.
Your coverage needs may have changed
It is important to be aware of what inclusions are in your car insurance policy at any given time. Some protections in an insurance policy may have an expiration date that may not be automatically carried forward upon renewal or may get more expensive after a certain number of years.
Your circumstances may have changed
As highlighted in the scenarios earlier in this article, such as additional drivers to the policy, necessitate that at renewal time, you should advise your insurance provider of any changes, which can impact your premiums.
Rates can change frequently
Renewal time is a great chance to compare insurance rates and for drivers to ensure they are getting the best price for their needs. Auto insurance companies change rates every quarter, potentially for reasons that have nothing to do with your driving, and all to do with their risk tolerance. By regularly comparing the market, you can ensure that you are getting the best deal on your car insurance – especially if you like a little more cash in your wallet.
Final thoughts on auto-renewing insurance
Having an auto-renew option for your car insurance policy is convenient, but can potentially be costly. Yearly revision of your life changes is still necessary to safeguard the best possible rate available to you. Though some insurance companies offer loyalty discounts for renewing policies, there may be more savings to be had elsewhere. That’s why you should always speak with your isure broker to review your policy each renewal. And in doing so, it also can prevent having to pay any penalties that your insurer may apply for cancelling your insurance before renewal or having a gap in coverage.
