What happens if your car insurance lapses in Canada?

If your car insurance lapses in Canada, you are no longer covered, you cannot legally drive the vehicle. If your break in coverage was caused by non-payment, your car insurance premiums may rise significantly when you get insured again.

We break down what a lapse is, what no auto insurance can cost you in fines, higher premium risks of uncovered accidents, and how you can fix a gap in coverage.

What is a car insurance lapse?

A car insurance lapse is a period when your vehicle has no active insurance. It can happen if you miss a payment and your insurer cancels your policy (including when a payment bounces and isn’t made up in time), if you cancel and don’t replace your auto insurance coverage, or if your policy ends and you don’t renew.

A lapse doesn’t always raise your rates. It depends on why you had a break in coverage, and also on provincial rules surrounding auto insurance.

Read more: How a gap in your car insurance history can affect your rate

Can you legally drive during a car insurance lapse?

No. Driving without insurance can lead to serious penalties. Penalties vary by province, but all jurisdictions treat driving without insurance as a serious offence. For example, Ontario drivers can face fines ranging from $5,000 to $50,000, while Alberta’s penalties start at $2,500 for a first offence and can reach $20,000 for repeat offences.

What if you have an accident while your insurance has lapsed?

If your auto insurance has lapsed, you won’t have coverage for an accident. You’ll be responsible for paying any liability costs, and you could face significant financial consequences.

According to Steven Harris, licensed insurance broker and LowestRates.ca expert, without an active policy, you’ll be responsible for damage to your own vehicle, any damage you cause to other people or their property, and any legal claims that arise if someone is injured. In some cases, an accident could result in a lawsuit and substantial out-of-pocket costs.

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

Does reason for a lapse in auto insurance vary the impact on premiums?

Yes. Insurers call a lapse ‘ratable’ when they can use it to set your premium. Harris explains that “not having a vehicle is not [considered] a ratable lapse as a non-payment".

Rules also differ by province. For example, in Ontario, insurers can’t use a break in coverage to set your rate, with four exceptions, according to FSRA. They can consider charging you higher premiums for not carrying insurance only if:

• You were convicted of driving without insurance during a lapse in coverage
• Your policy was cancelled because you didn’t pay
• Your licence was suspended because of a driving conviction
• You tried to hide your driving record to get a lower premium

If you didn't have insurance for any other reason, such as not owning a car to insure, your insurer can’t use it against you.

Can a late or bounced payment cause a lapse in car insurance coverage?

A late payment doesn’t cancel your policy on its own. For example, in Ontario, insurers must provide notice before cancelling coverage for non-payment.

If you pay the outstanding amount before the deadline in the notice, your policy remains active and there is no lapse. If you don’t, your policy is cancelled and any period without insurance becomes a gap in coverage.

A lapse caused by non-payment can affect future premiums, depending on your province and insurer. If you’ve missed a payment, contact your insurer as soon as possible to avoid a cancellation.

FSRA’s guidance on lapses also notes that insurers should consider why the lapse happened and how serious it was. A lapse for non-payment shouldn’t raise your premium as much as a conviction for driving without insurance.

Rules and notice requirements vary by province.

Is it a lapse if you store your car for the winter or aren’t driving it?

Not if the vehicle remains insured.

The Insurance Bureau of Canada (IBC) recommends keeping comprehensive coverage on seasonal vehicles, including classic cars stored between drives. Having coverage protects against risks such as theft, fire, vandalism, and some weather-related damage while your vehicle is parked.

If you won’t be driving the car, you may be able to reduce coverage without cancelling the policy:

• Ontario: Drivers can add the OPCF 16 Suspension of Coverage endorsement, which removes road-use coverages while the vehicle is off the road. Comprehensive coverage can remain in place for risks such as theft and fire.
• British Columbia: ICBC offers a Storage Policy for vehicles that are not being used.
• Other provinces: Options vary. Check with your insurer before changing coverage.

Remember not to drive a stored vehicle until your insurer confirms full coverage has been reinstated.

Cancelling your policy entirely is different. The vehicle would no longer be protected against risks such as theft, fire, or vandalism, and you’d create a gap in your insurance history. If the vehicle is leased or financed, your lender may also require certain coverages to remain in place.

How much more could you pay after a break in auto insurance coverage?

If your lapse in auto insurance coverage was caused by non-payment, you can expect to pay about $1,000 to $3,000 more on annual premiums, according to Harris. The exact amount of increase depends on your insurer.

Read more: How much car insurance do you really need in Canada?

Can a lapse in auto insurance coverage be backdated or fixed?

Sometimes. If a lapse on your record was really an administrative issue and you had insurance from a different provider the whole time, your insurer may agree to correct it.

This can happen when you switch insurers. For example, if your new policy starts on June 1 but you forget to cancel your old one, the old policy may eventually be cancelled for non-payment. That can make it look like you had a lapse even though you were insured the entire time.

In some cases, your prior insurer can change the cancellation date so it matches the start date of your new policy. That shows one policy ending as the next began, with no gap in coverage.

Harris says you’ll usually need proof that you and the vehicle were covered by another policy during that time. If your vehicle was already insured elsewhere, your insurer may agree to correct your record.

Documents such as your new policy paperwork can help prove there was no gap in coverage. The insurer makes the final decision.

Learn more: Can you negotiate your auto insurance rates?

What should you do right away if your car insurance has lapsed?

If your policy has lapsed because of missed payments, Harris says your first priority should be getting car insurance coverage back in place. Until you do, avoid driving your vehicle.

If you’ve missed paying your monthly premium or your payment bounced but your policy hasn’t been cancelled yet, check your mail and email for a cancellation notice and contact your insurer or broker right away. If you pay everything you owe, plus any administration fee, by the deadline in the notice, your policy stays active.

It’s also worth checking whether you were covered under another policy during the gap. If you had coverage elsewhere, you may be able to have the lapse removed from your record.

Frequently Asked Questions (FAQs)

How much could I be fined for driving without insurance?

Penalties for driving without insurance vary by province. In Ontario, fines range from $5,000 to $50,000. In Alberta, they start at $2,500 for a first offence and can reach $20,000 for repeat offences.

Who pays for damages if I’m involved in a collision while my auto insurance policy has lapsed?

You would be liable for all personal and property damages during a lapse in auto insurance. Without an active policy, you’re responsible for damage to your own vehicle, damage you cause to other people or their property, and any legal claims if someone is injured. In some cases, this could lead to a lawsuit and substantial out-of-pocket costs.

Will my insurer charge me more if I went without a car for a while?

No. Not having a vehicle to insure is not a ratable lapse, so it has no effect on your premium. A lapse caused by non-payment is ratable and can add about $1,000 to $3,000 for the year to your premium, depending on your insurer, according to Steven Harris, licensed insurance broker and LowestRates.ca expert.

What proof do I need to have a lapse in my car insurance record corrected?

You’ll need documentation showing that both you and your vehicle were covered under another policy during the gap, so there was no break in coverage. Your insurer may then agree to backdate cancellation of your original policy, but the final decision is up to them.