Six reasons your auto insurance policy could be cancelled

By: Lisa Coxon and Arshi Hossain on August 5, 2026

Updated by Arshi Hossain on August 5, 2026 | Originally written by Lisa Coxon on July 2, 2025

QUICK TAKEAWAYS:

Auto insurers can cancel your policy for reasons such as non-payment, misrepresentation, increased risk, lack of financial interest in the vehicle, or failure to meet required inspection and certification rules.
A cancelled policy can remain on your insurance record and make it more expensive to obtain coverage in the future.
Public auto insurers in B.C. and Saskatchewan may have additional cancellation triggers, including registration declaration requirements, safety inspections, and vehicle certification rules.
Policy cancellations resulting from insurer shutdowns or an insurer leaving a market generally do not negatively affect your insurance record.
Keeping your insurer informed about changes to your driving status, vehicle, address, or financial situation can help prevent avoidable policy cancellations or future premium increases.

There are many reasons why an insurer may cancel your policy, including non-payment of premiums, misrepresentation, increased risk, or withdrawing coverage in your area. A cancellation can stay on your record and may lead to higher premiums with your next insurer.

For example, a 35-year-old male driver in Toronto, Ontario, who had his policy cancelled for non-payment and a one year coverage lapse (July 2024 to July 2025) paid $134 more per month (a little over $1,600 annually) compared to similar driver with no gap in insurance, based on the recommended rate available.

Whether you live in a province with private auto insurance, like Ontario, or public insurance, like B.C. and Saskatchewan (SGI), the reasons for a policy cancellation could vary. Public insurers may have additional requirements, such as vehicle inspections and certifications.

“Although we have the authority to cancel an owner’s certificate, it is extremely rare,” says Lindsay Wilkins, media relations advisor at the Insurance Corporation of British Columbia (ICBC). “Customers almost always initiate a cancellation.”

Still, insurance companies can cancel your policy in the following situations:

Not paying your monthly premium
Misrepresenting your vehicle, failing to update information, and making fraudulent claims
Risk of insuring you or your vehicle has changed
You have no "financial interest" in insured vehicle
Failing to comply with required inspections, safety certificates, or orders
Insurance company stops servicing a region or shuts down

1. Not paying your monthly premium

Your insurer may cancel your policy if you fail to pay your premiums on time, according to the Financial Services Regulatory Authority of Ontario (FSRA), which could also lead to higher insurance costs in the future.

When you purchase an auto insurance policy, you need to make either monthly or annual payments. Non-payment may put you in a higher risk category, which would likely result in an increase in your premium.

If you use a credit card for automatic monthly premium payments and the transaction is declined, your insurance company may have to pay a non-sufficient funds fee (NSF). So, if you anticipate difficulty making your monthly payments, contact your insurance provider right away to let them know. They may be accommodating and find a solution that works for both of you.

According to Wilkins, ICBC generally won’t cancel a policy if a customer defaults on a payment, but it could seize your licence plate.

If you choose not to renew your policy, call your provider and end the agreement.

2. Misrepresenting your vehicle, failing to update information, and making fraudulent claims

Your auto insurance provider may cancel your policy if you provide inaccurate information, fail to disclose important changes, or don't update your policy details when required.

According to the FSRA , “an insurance company has the right to cancel your policy if the information you have given is not correct or complete. Non-disclosure or misrepresentation on your part of any of these facts could cause your rates to go up. Furthermore, it could render your policy null and void, and leave you without protection in the event of a claim.”

Requirements can differ in provinces with public auto insurance.

Saskatchewan Government Insurance (SGI) spokesperson Tyler McMurchy says that failing to complete SGI’s annual Registration Eligibility Declaration (RED), or maintain required cargo or liability insurance, can also result in policy cancellation.

In B.C., drivers who commit fraud, drive without a valid licence, or are convicted of certain criminal offences may become ineligible for Basic Vehicle Damage Coverage (BVDC). This coverage, which is part of ICBC’s Enhanced Care model, typically covers up to $200,000 in vehicle repair costs when another driver is responsible for a crash.

3. Risk of insuring you or your vehicle has changed

Auto insurance is based on risk, which your insurance provider monitors closely. If your insurer determines that the risk of covering you or your vehicle has increased significantly, it may choose to cancel your policy.

Your risk profile could change if you’ve accumulated multiple traffic convictions or filed several expensive at-fault claims.

A high-risk driver may find it difficult to obtain coverage through a standard policy. Drivers labelled high risk may need facility insurance, where premiums can cost, on average, between $8,000 and $10,000 a year.

“We do not cancel a certificate when there are ‘too many claims’,” says ICBC’s Wilkins. “However, we may restrict what coverage the owner can purchase, for example, limiting the deductible or the coverage that is available.”

It’s important to be upfront and honest about any changes, including moving residence. Insurance companies consider factors like local theft rates and claims history when assessing risk, and your premium could change if you relocate to an area considered higher risk.

4. You have no “financial interest” in insured vehicle

You generally can't insure a vehicle if you don't have a legitimate financial stake in it. If the vehicle is damaged or written off and you wouldn't suffer a financial loss, your insurer may determine that the vehicle is improperly insured and cancel the policy.

“Insurance is based on the legal concept of ‘financial interest’,” explains McMurchy. “Other than life insurance, one cannot insure something that they do not own. When a vehicle is registered to someone that does not have a financial interest in the vehicle, the vehicle is improperly registered,” she continues.

McMurchy offers this example: suppose a child is financially dependent on their parent, who is named on the car loan and pays for the vehicle’s maintenance. In that case, SGI would consider the parent to have a financial interest in the vehicle, even if it’s technically “owned” by the child.

“This does not extend to [the parent] simply paying the insurance premium,” McMurchy clarifies. “But in cases where a child is financially independent, living on their own, and carries the [vehicle] loan in their own name (if there is one), the parent does not have a financial interest in the vehicle. So, it would be improper for the adult child to register the vehicle in a parent's name.”

5. Failing to comply with required inspections, safety certificates, or orders

Failing to complete required vehicle inspections, obtain safety certificates, or comply with safety orders can result in your provider cancelling coverage. These requirements are particularly important in provinces with public auto insurance, like B.C. and Saskatchewan.

In Saskatchewan, for instance, drivers must undergo a first-time registration inspection, a safety order, a safety inspection, a total loss vehicle inspection, and obtain a certificate of safety fitness.

Failing to comply with any of these requirements, or having an unsatisfactory rating on the vehicle's certificate of safety fitness, could be grounds for SGI to cancel a policy.

6. Insurance company stops servicing a region or shuts down

Your auto insurance company ending operations in a particular region or closing shop altogether, can result in cancellation of your policy.

You will still need to find another provider, but this type of cancellation won’t count as a stain on your insurance record. Closure of an insurance company is unrelated to poor consumer conduct and completely out of your hands.

Having an open line of communication with your auto insurance provider can help you avoid a policy cancellation and a potential rate hike in future.