How a gap in your car insurance history can affect your rate

This article has been updated from a previous version.   

Insurance companies take a lot of variables into account to price car insurance rates, including your age, gender, commute, and driving record.   

Another important factor is your insurance history and how long you’ve maintained continuous coverage. Generally, the longer you’ve been insured without any lapses or gaps, the lower your car insurance premium should be. Being able to consistently make payments without cancelling your policy shows insurance providers that you’re a trustworthy and reliable customer.    

But what happens if you have a gap in your insurance coverage? Does this impact your chances of getting an affordable auto insurance rate?    

The answer depends on several factors, including the reason for the gap, your location, and your insurance provider. 

Why would I have a gap in my car insurance coverage?  

A lapse in your auto insurance coverage can happen for a variety of reasons, some completely harmless. You might have sold your vehicle or decided not to drive it for a while and decided not to keep your policy active.  

But in other cases, gaps in driving history may come from a revoked license, or difficulties making payments which can lead to policy cancellation. 

Regardless of the reason, going without coverage for a period of time can raise red flags for insurers. Depending on how long you've gone without coverage and the reason for your gap, insurance providers may consider you a high-risk driver.  

Premiums for high-risk drivers are much more expensive than the premiums available to average drivers, and not every insurance provider may be willing to cover you.   

Read more: What is facility car insurance for high-risk drivers?  

Does a gap in coverage increase your premium?  

If an insurance company initiates cancellation of your policy, you may see an increase in your next insurance premium with a new provider. 

Common reasons for policy cancellation include:    

Non-payment  

Failing to pay your premium can result in immediate cancellation.  

Licence suspension  

If your driver’s licence is suspended—due to a conviction, for example—your insurer may cancel your policy. Similarly, being caught driving without insurance during a lapse can lead to higher premiums when you reapply. 

Fraud or failure to disclose information  

Providing false information, such as using an incorrect postal code to lower your rate, can lead to cancellation and long-term consequences for your insurance record. 

Keep in mind that driving without car insurance is illegal in Canada. If you own a vehicle, you are legally required to have valid insurance coverage. Even if you don’t own the car but drive it regularly—such as a family member’s or friend’s vehicle—you should make sure that you’re listed on their insurance policy. 

Related: What to do if your insurance provider suddenly increases their rate?  

Does any gap in your insurance history impact your rate?  

If you have a gap in your insurance history for an innocent reason, you may not be subject to a rate increase — especially if you live in Ontario.    

Since November 1996, Ontario has prohibited insurance companies in the province from pricing based on a gap in coverage. This means providers in Ontario can’t use any lapses in coverage to determine a driver's premium for reasons other than non-payment and serious offences, such as licence suspension or fraud.   

While insurers are allowed to consider some gaps in their risk classification systems, not all lapses are treated equally. For example, a gap due to financial hardship should not carry the same weight as one caused by a conviction for driving without insurance. 

That said, it’s still important not to let your insurance lapse unnecessarily by neglecting to pay your bills. It only takes a day without it to receive a fine or be on the hook for damages if you get into a collision without coverage.   

How to avoid a gap in your insurance coverage  

To avoid any gaps in coverage, make it a habit to keep your auto insurance policy active, regularly updated, and shop around for the best options. If that's not possible, the next best option is to be added to someone else’s existing policy.  

For instance, if you’re a parent and your child is a student attending school in a different city, some carriers will allow you to add them to your policy while they're away. Being listed as a secondary driver still constitutes an active insurance history.    

If you're driving less than you used to, you might want to look into usage-based insurance. This type of coverage adjusts your premium based on how often and how safely you drive. Another option is switching to comprehensive-only coverage, which protects your car from risks like theft, falling branches, or damage caused by other vehicles when you're not driving. 

There are two types of usage-based insurance to choose from: 

• Pay-as-you-drive means your insurance premiums are directly linked to the distance you drive. The less you drive, the lower your premium. It’s ideal for infrequent drivers or those who primarily use public transportation.  
• Pay-as-you-go charges the driver based on the number of kilometres driven throughout the years. It tracks factors like speed, braking, and time of day.  

If you still decide to cancel your car insurance policy for any reason, make sure you contact your insurance broker or agent and ask them about how it will impact your insurance history and future premiums.  

Read next: Switching your car insurance: penalty, cancellation fees, and rules