How to cancel your auto insurance policy

Cancelling mid-contract could lead to hefty penalty fees

Zandile Chiwanza, LowestRates.ca

Aug 18, 2021 • August 23, 2021 • 3 minute read • Join the conversation

Pedestrians wait for a pick-up truck that failed to stop to let them cross the street at the crosswalk on Peel St. south of St. Catherine St. in Montreal, Monday October 31, 2011. Photo by John Mahoney /Montreal Gazette

Whether you’ve found a better deal elsewhere, sold your car, or parked it indefinitely (thanks to geez, I don’t know… a pandemic) and no longer need coverage, you may be considering cancelling your auto insurance policy.

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Regardless of the reason, here are the steps you should take if you want to cancel your auto insurance policy:

Check your policy. Every insurance provider has its own rules around cancellation. So the first step you should take is to check your policy and read the fine print for the exact terms and conditions.
Contact your insurer. Speak to an authorized representative about the cancellation process and get them to answer any questions you have. Some insurance providers require you to submit a request in writing to confirm your cancellation. If you’re just switching providers, make sure that before you cancel, you have a new policy in place, and have confirmed the quote with your new provider.
Confirm in writing. Once you’ve spoken to your provider and decided to go ahead with the cancellation the best practice is to ask for confirmation in writing that your policy was indeed canceled.

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Keep in mind, however, that cancelling your insurance may come with a fee — especially if you’re cancelling before your policy comes up for renewal.

How to cancel car insurance without charges

Your insurance company won’t typically charge you a fee for a standard cancellation, but if you’re mid-contract and decide to cancel your policy, the chances of paying a penalty fee are high.

How much that fee is, depends on the time remaining on your policy term, any outstanding payments, non-refundable fees, and the insurer’s own cancellation policy.

For example, when a driver in British Columbia wants to cancel their auto insurance coverage without penalties, they must return their licence plate to their broker, since it’s directly linked to the Insurance Corporation of British Columbia’s Autoplan policy .

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Cancelling your car insurance mid-contract isn’t always a bad idea. You just need to be aware of the costs associated with the decision. To avoid any fees, renewal time is the best time to cancel car insurance coverage.

“If the cost of cancelling your old policy and switching to a new one end up costing more over the same time frame than it would to stay on your current coverage then it makes more sense to wait and renew when your policy ends,” Dominic Licorish wrote in a blog post earlier this year.

Drawbacks to cancelling your car insurance

Unless you no longer require coverage, make sure your new policy kicks in before the cancellation date of your old policy. If not, you risk not having coverage while waiting for the new policy to take effect, which results in having a gap in coverage history. Insurance companies will look for any gaps in coverage when determining your rates, and the longer you go without insurance, the higher your premiums can be.

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If that’s not enough to deter you from trying it, then consider the penalties: if you’re caught driving without car insurance, you could receive a fine, licence suspension of up to a year, or have your vehicle impounded.

If you get into an accident and you don’t have insurance, the consequences are even worse. If you’re the at-fault driver you will be found responsible for any damages and won’t have access to any type of accident benefit. That’s money that can help cover any loss of income and medical expenses from the accident.

Overall, getting caught driving without car insurance will adversely affect your ability to get insurance — and get cheap rates.

Just because you can cancel your car insurance at any time doesn’t mean you should ever drive without it. Remember: if you’re not driving your car as much and just need the basic level of insurance, there’s always the option to drop certain coverages instead. We found in a recent report that this could save you up to 96 per cent on your premiums .

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