Have a gap in your car insurance history? Here's how it could affect your rates

When determining the cost of your monthly car insurance premiums, insurance companies evaluate a long list of variables, including your age, commute, and driving record.

Your insurance history (how long you’ve been consistently insured for) is also a factor. Generally speaking, the longer you’ve been insured for without any lapses or gaps, the lower your car insurance premiums should be, since your continued ability to make payments and not have a policy cancelled signals to insurance providers that you’re a trustworthy and reliable customer.

But what happens if you have a gap in your insurance coverage? Does this have an impact on your auto insurance rates?

The answer depends on the reason for the gap, where you live, and your insurance provider. 

Reasons for a gap in insurance coverage

A lapse in your auto insurance coverage can happen for a variety of reasons. Maybe you sold your vehicle or decided not to drive it for a while and so you didn't pay to keep your policy active. Or perhaps your licence was revoked, and so you didn't maintain your policy. Or maybe you stopped being able to afford your bill and your insurance company terminated your policy. 

According to Sara Caruana, service team leader for DirectRate.ca, depending on how long you've gone without coverage, insurance providers may consider you a “high-risk driver.” Premiums for high-risk drivers are much more expensive than average drivers and not every insurance provider will be willing to cover you.

Does a gap in coverage increase your premiums?

If an insurance company cancels you for a negative reason, Caruana says that's when you will see your insurance premiums rise.

These reasons can include:

• Non-payment of monthly premiums. If the gap in coverage was the result of your insurance company cancelling your policy due to non-payment.
• Licence suspension. When your driver's licence is suspended due to a driving conviction, your insurance provider may cancel your policy. Similarly, if you're convicted of driving without insurance during the coverage lapse period, you could also face higher insurance premiums when you try to get reinsured. 
• Fraud or failure to disclose information. This includes any misrepresentation of facts regarding your driving record that leads to the insurance provider cancelling your policy.

The cost of the increase will vary depending on the cause of the lapse, but it may also be determined by the length of time you have been without insurance.

Even when switching insurance providers, it's critical to make sure your insurance doesn't lapse

"It's impossible to say what the average percentage increase is because every situation is different," says Caruana. "In Alberta, for example, if you go more than 24 months with no insurance, this will erase your insurance history for some carriers, and you're treated like a new driver."

In some cases, insurance providers consider having no previous auto insurance history or driving experience riskier than having a violation on your record. That's why premiums can be so expensive for new drivers. 

Not every gap in insurance history impacts rates

"There might not be a huge concern for you if you have a gap in your insurance history for an innocent reason," says Caruana. "Especially if you live in Ontario."

That’s because, since November 1996, Ontario Regulation 664 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 in determining driver's premiums for reasons other than non-payment and serious offences, such as license suspension or fraud. 

If you no longer need insurance because you no longer own a car, for instance, it will be marked on your file as "no vehicle, no insurance," says Caruana. "Which means it will not affect your premiums."

Caruana says while the regulation allows insurance companies to consider some gaps in its risk classification system, not every gap will have the same impact on premiums. For example, a lapse caused by a person's inability to afford the policy's premiums should not result in a premium rise of the same amount as a lapse caused by a person being convicted of driving without insurance.

That doesn't mean you can go around forgetting to pay your bills. Even when switching insurance providers, it's critical to make sure your insurance doesn't lapse. It only takes a day without it to receive a fine or be on the hook for damages if you get into an accident without coverage. 

How to avoid a gap in your insurance coverage

The best way to avoid a gap in coverage is to keep your auto insurance policy up to date and continuously active. If that's not possible, the next best option is to have yourself added to another person's policy. 

For instance, if you’re a parent and your child is a student, some carriers will allow you to add them to your policy while they're away at school for instance. 

"You don't have to be listed as a primary driver,” says Caruana. “Just as long as you're listed as a driver.”
If you still want 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 premiums in the future.