With the rising costs of living and more financial challenges becoming apparent, an increasing number of Canadians appear to be worrying about their finances during this economic downturn. With that in mind, what happens if you miss a home or car insurance payment? Non-payment of insurance can quickly escalate and land you in a difficult spot with your insurer. The outcome is that your insurance rates may increase or be denied. Let’s examine the repercussions of insufficient funds or an NSF insurance payment and strategies to keep them from occurring.
What is an NSF Insurance Payment?
An NSF, or non-sufficient funds, insurance payment, occurs when your bank account does not have enough money to cover an automatic insurance payment. There are several possible reasons you might miss an insurance payment. It can be due to a simple oversight, an issue with automatic withdrawal at your bank, or even neglecting to notify your insurer of a change in bank accounts. Regardless, 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. Not only now, but in the future.
If this does happen, you typically have to pay an NSF fee of $25–$45 at the bank and go through the extra hassle of getting the bill paid. Also, some insurance companies charge their own NSF fees on top of the ones your bank charges. While every company has its own rules regarding non-payment, a couple of missed payments can sometimes result in cancellation.
How Does An NSF Insurance Payment Affect Your Insurance?
“The biggest consequence of a missed auto insurance premium is having your auto insurance policy cancelled,” says Anne Marie Thomas, director of consumer and industry relations at the Insurance Bureau of Canada. Failure to make a payment or receiving a cancellation can affect your auto insurance in several other ways:
- Cost increase: You may face a premium increase upon renewal of your policy.
- Insurance history: A note of an NSF insurance payment will be made on your insurance history. They will appear on your Autoplus Report, which insurance providers use instead of credit reports when assessing you as a new client for insurance.
- Additional fees: Late payment or NSF fees may be charged by the insurance company, as well as your bank.
- Payments: There may be a requirement for you to pay your premiums upfront in three or six-month terms, or even a full-year term.
- Credit score: While your credit score can’t influence whether or not you obtain car insurance, a missed payment can affect your credit. If you switch to a new insurer, any outstanding payments will be sent to collections and may negatively impact your credit rating.
What Happens When You Don’t Pay Your Car Insurance in Ontario?
If there isn’t money in your account to support your automatic withdrawal or credit card payment, your insurer must warn you of the NSF payment and let you know of the action they plan to take. They will send notice of an NSF payment and give you, the policyholder, a set number of days to make the payment:
- 10-day notice if the letter of cancellation is given in person, or
- 30-day notice by sending the notice by mail to your last known address
- The notice will inform you that you have until noon of the business day before the last day of the notice period to pay the arrears, with an administration fee.
- If you miss the cut-off, they will automatically cancel your policy, effective at 12:01 a.m. on the last day of the notice period.
- If you pay the arrears and administration fee on time, then you will not have a policy cancellation.
- If there is a gap in your coverage, it may affect your driver rating and pricing.
- You are not to drive your car, as it is illegal to drive any vehicle in Canada without car insurance.
A processing fee applies for reinstating your auto insurance policy. The reinstatement fee differs among all auto insurance companies, but the average is around $50. In a worst-case scenario, you might only discover an insurance cancellation if police pull you over, and it is no longer valid. In a province like Ontario, driving without insurance can result in a fine of up to $10,000 for a first offense. The costs can be even greater if vehicles suffer damage, or worse, someone suffers injuries.
Consequences of an NSF Payment
If you have a history of NSF Insurance Payments, that may complicate matters. Firstly, if you have a history of missed payments, you may be known as a high-risk driver by all insurers. This will make it more challenging to obtain a low premium. You can also face difficulties obtaining insurance from other companies. Secondly, a record of non-payments may stay on your insurance record for up to three years. Lastly, if you don’t pay by a specific date, the insurance company may send the matter to a collection agency. This can affect your credit score!
Insurance Payments: Is There A Grace Period?
In today’s world, it’s easy for bills to accumulate. When this occurs, sometimes a payment slips through the cracks. However, if that missed bill is your auto insurance, the consequences can be severe. Driving with no insurance isn’t just risky, it’s illegal! Luckily, many insurers offer a grace period. This is a short window of time that gives you a chance to catch up on your period without losing any coverage.
Generally, a grace period can range from a few days to a month before your policy is cancelled for non-payment. This can vary depending on the province you’re in or your insurance provider. Typically, the notice period is 15 days if sent by registered mail, or as short as 5 days if delivered in person.
If you’re unsure about how long your own grace period is, you can generally check your policy documents or contact your insurance provider or broker. Although a grace period can be helpful when you’re in a tough spot, it is essential not to rely on them too heavily.
What To Do If You Think You Will Have an NSF Insurance Payment
According to insurancehotline.com, if you think you may miss a payment on your auto insurance policy, consider taking these steps:
- Call your insurance broker. Call in advance to explain what your challenges are and inquire about arranging payment options. Some insurance companies may forgive you for missing one payment. However, it’s always important to be sure.
- Contact your financial institution. It may be worthwhile to contact your bank or credit union to ask about adding overdraft protection to your account. This will provide a buffer in case a payment date precedes the date when income is deposited into your account.
- Set a reminder notice on your phone. We all rely on our mobile devices to keep us on top of our daily tasks. So, set payment reminders on your smartphone or email calendar to ensure you don’t miss any payment deadlines.
- Build an emergency fund. If it’s possible, set aside money to ensure that you won’t have an NSF insurance payment on your record.
Consider These Options Instead
- Paying annually: You can pay your full annual premium up front. Most companies offer discounts for doing that, and you can save up to 10%.
- Account balance: Have a buffer in your account to ensure you have enough money for payment.
- Shopping around: Let isure shop around for you and explore options to lower your costs.
- Suspending or reducing your auto insurance coverage: Until things perk up and you’re in a stronger financial position, this may be a good option. It is always worth getting in contact with your insurance representative to discuss any possible options!
NSF Insurance Payments: Conclusion
If you get new insurance, make sure you’ve officially cancelled your old policy. Please don’t assume it’s been done for you because you don’t want that to appear as a non-payment, either. Typically, if you have an NSF insurance payment on your record, your car insurance policy will likely be cancelled. Your best option is to be proactive. Contact your insurance broker before missing a payment to inform them that you are facing financial difficulties. Many insurers work with their customers to offer various payment options. If you are in the market for new insurance, don’t hesitate to reach out to us at isure! Contact us or request a quote today!
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