Auto insurance might be mandatory in Canada, but that doesn’t mean that once you find yourself a policy, you’re guaranteed it forever.
Your insurance company has the right to cancel your policy for several reasons. And if that happens, not only will it reflect poorly on your record — it could even result in higher premiums with the next insurer.
For example, when we used the LowestRates.ca auto insurance quoter to find out what the difference in monthly premiums might be for a driver who’s never had a policy cancelled on them versus one who’s had a policy cancelled on them after five months due to non-payment, we saw an increase of $14 a month on the lowest rate available. That’s $168 a year.
Now, depending on whether or not you live in a province that issues private auto insurance, like Ontario, versus public insurance, like British Columbia and Saskatchewan, the reasons for cancellation could vary slightly. For instance, there may be more inspections and certifications to comply within the public auto insurance sphere than in the private sphere.
“Although we have the authority to cancel an owner’s certificate, it is extremely rare,” Lindsay Wilkins, senior communications specialist at Insurance Corporation of British Columbia (ICBC), told LowestRates.ca in an email. “Customers almost always initiate a cancellation.”
But insurer-initiated cancellations do happen. And here are some reasons why:
1. Not paying your monthly premium
When you purchase an auto insurance policy, you need to make either monthly or annual payments. Perhaps the easiest route to having your policy cancelled is by not paying for it. If you don’t want to renew your policy, don’t just stop paying. That will result in cancellation and maybe even put you in a higher risk category, which would likely result in an increase in premiums.
Say, for instance, you pay for your monthly premiums using automatic credit card payments. If one of those charges bounces, your insurance company is probably going to be on the hook for an NSF fee — and they’re not going to like that. So if you don’t think you will be able to make your payments, contact your insurer right away to let them know and hopefully work something out. They might be more understanding than you think.
According to Wilkins, ICBC generally won’t cancel a policy if a customer defaults on a payment, but it could seize your licence plates.
2. Giving false details about your vehicle / not providing updated information / making a fraudulent claim
A guy named Mark from Toronto learned this one the hard way. In a Globe and Mail article published in April, Mark wrote in to say that an auto insurer cancelled his auto insurance policy because he didn’t provide updated information by the deadline. Nothing had changed but Mark still filled out the form and mailed it in four days before the deadline. It didn’t make it in time, though, and the insurer cancelled his insurance.
According to FSCO’s website, “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.”
When it comes to public insurance, such as in Saskatchewan, failing to provide answers to Saskatchewan Government Insurance (SGI)’s Annual Registration Eligibility Declaration Questions, as well as Cargo or Liability Insurance Policies could result in you getting the boot, too, according to SGI spokesperson Tyler McMurchy.
There are some situations in British Columbia where ICBC will cancel an owner’s damage coverage, such as collision and comprehensive, like if customers are charged with certain criminal convictions or make fraudulent claims.
3. The risk of insuring you and/or the vehicle has changed
The world of auto insurance — or any insurance, really — is all about risk. It’s how your premiums are determined and it’s something insurance companies will closely monitor while you’re insured with them.
So, if you’ve become a higher risk since you first signed on with your insurer, it has the right to cancel your policy if it believes that the risk of insuring you and/or your vehicle has changed significantly.
This could happen if, say, you’ve accumulated a lot of traffic tickets or made several expensive or at-fault claims during your time with the insurance company. When that happens, it’s possible that you may be turned down by most insurers and have to get what’s called facility insurance, where premiums cost, on average, between $8,000 and $10,000 a year.
That’s why it’s important to be upfront and honest about any changes, like if you move (since some cities and even some neighbourhoods are considered riskier than others based on the number of claims that have been made there).
“We do not cancel a certificate when there are ‘too many claims,’ says Wilkins, of ICBC’s policy.
“However, we may restrict what coverage the owner can purchase, e.g. limit the deductible or the coverage that is available.”
4. You have no “financial interest” in the insured vehicle
“Insurance is based on the legal concept of ‘financial interest,’” McMurchy explains.
“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.”
That could result in cancellation.
McMurchy gives the following example: say a child is financially dependent on their parents (e.g., the parent is named on the car loan and maybe pays for maintenance and upkeep of the vehicle). In this scenario, SGI would consider that parent as having a financial interest in the insured vehicle, even if the vehicle is technically “owned” by the child.
However, says McMurchy, “This does not extend to [the parent] simply paying the insurance premium.”
“But in cases where a child is financially independent, living on their own, carries the 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
This one’s particularly important in provinces with public auto insurance, like British Columbia 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.
If they fail to comply with any of these, or their Certificate of Safety Fitness is rated unsatisfactory, that could be grounds for SGI to cancel the policy.
6. The company stops servicing a region or shuts down
If your auto insurance company stops operating in a particular region or stops operating altogether, it can cancel your policy. While this cancellation will still require you to find another auto insurer, the good news is it won’t count as a stain on your insurance record, since it had nothing to do with poor consumer conduct and was completely out of your hands.