As most Canadians know, it’s illegal to drive a vehicle without insurance in every province and territory across Canada. Still, confusion and misconceptions around cancelling auto insurance are very common. You may be considering cancelling your policy because you’re switching insurers for a better rate, selling your vehicle, or no longer driving. Whatever the reason, it’s important to understand your options — and the facts — before making a decision. In this article, we explain why you may want to switch or cancel your insurance, and other considerations that should factor into your decision. We’re here to help debunk the 7 misconceptions about cancelling your auto insurance policy. And finally, we will lay out the proper facts around cancelling auto insurance.
An important point to remember: if you’re switching insurers, make sure you have a new insurance policy in place before you cancel the old one. So be sure to get all your insurance quotes in plenty of time to do that. Also, make sure that you inform your new insurance provider when your previous insurance policy expires. If you have an outstanding car loan or lease, you must also notify your lender that you’ve changed insurance companies.
Reasons People Cancel their Insurance
Many Canadians consider cancelling their auto insurance at some point. Common reasons include:
- Finding a better rate: After comparing premiums with friends or family, you may discover you’re paying more than necessary.
- Dissatisfaction with coverage: Your current policy may no longer meet your needs or budget.
- No longer owning a vehicle: You’ve sold your car or completed a lease and no longer require insurance.
- Bundling policies: Combining auto and home insurance with one provider can lead to meaningful savings.
There’s no harm in reviewing your options — and in many cases, it can lead to significant savings.
Is Cancelling Your Auto Insurance Policy the Best Option?
Not always. If your goal is simply to reduce costs or adjust coverage, you may be able to modify your existing policy instead of cancelling it outright.
Some of the things you may be able to change without cancelling your policy include:
- Adjust coverage limits and optional coverages
- Increasing or decreasing your deductible
- Changing vehicles
- Updating modifications and accessories
In some cases, insurers may waive cancellation fees if you’re switching policies or upgrading coverage (for example, moving from third-party to comprehensive coverage). If you want to upgrade from third party car insurance to comprehensive car insurance, an insurer may be happy to cancel your current policy and give you a new one without charging any fees.
Common Misconceptions About Cancelling Your Auto Insurance
1. “I don’t want to pay the large cancellation fee!”
Many drivers worry that cancelling mid-term will result in an unreasonably high fee. In reality, cancellation fees vary and are often lower than expected — especially if you’re closer to your renewal date. In some cases, you may even receive a refund. Before deciding, speak with your isure broker to understand the exact cost.
2. “I don’t want to pay the cancellation fee, so I’ll just wait until renewal to move over.”
Waiting until renewal isn’t always the best financial choice. If another insurer offers significant savings, the cost of cancelling early may be outweighed by the lower premium. Rates can change at any time, and a better offer available today may not be there at renewal. Comparing cancellation costs against potential savings can help you decide whether switching now makes sense.
3. “Does it look bad if I cancel my insurance, and will I be penalized with worse rates?”
No. Cancelling your own policy does not negatively impact your insurance history. However, there is an important distinction:
- Customer-initiated cancellations are generally not an issue
- Insurer-initiated cancellations: When an insurance company cancels your policy, you may face negative consequences when attempting to secure insurance again.
4. “Do I need to also cancel my registration?”
Yes. If you are no longer driving the vehicle, you should cancel or transfer your registration through your provincial service centre. Cancelling insurance while still driving or keeping a registered vehicle can result in fines, licence suspension, or penalties.
5. “It’s a tedious process to send in all of those forms again!”
For many isure clients, switching insurers is simpler than expected. Your broker already has your documentation on file and can often transfer your information with minimal effort on your part. In some cases, switching insurance companies can be completed with little more than a conversation.
6. “I can’t cancel my insurance right now because I have an open claim.”
This is a common misconception. You have the right to cancel your auto insurance at any time, even if you have an open claim. The claim will still be handled according to the terms of the policy that was in place at the time of the incident.
7. “How do I know if cancelling is the right choice?”
If you are provided with a lower rate, it’s simply a matter of adding up the costs of cancelling early and the costs of the new policy and weighing them against the savings on the premiums. Calculate how much you will save over the policy term on premiums alone and subtract from the early cancellation costs. Switching insurance companies may be beneficial, you just need to weigh the pros and cons.
It comes down to simple math. Compare:
- The cost of cancelling early
- The cost of your new policy
- The total savings over the policy term
If you still come out ahead, then cancelling your auto insurance right away is the right choice. Start by using isure’s Cancellation Calculator.
Cancelling Your Auto Insurance: Final Thoughts
Cancelling auto insurance doesn’t have to be complicated — or intimidating. Understanding the facts can help you make a confident, informed decision that fits your needs and budget. If you’re considering cancelling or switching your auto insurance, contact an isure insurance broker. We’re here to guide you through the process, explain your options, and help ensure a smooth transition with no gaps in coverage.
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