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Non-payment of auto insurance eventually results in the insurer cancelling the policy. It seems simple enough, however, there are some complications that range from inconvenient to serious and expensive. Know what to expect before letting your coverage lapse.

Car Insurance Terms

Most auto policies in Canada have an annual term, though there are some variations. British Columbia offers temporary coverage intended for use around the time of car purchase, and Ontario offers six-month policies.

Considering the annual term, the insurance company expects that the full premium is paid in return for insurance coverage for the entire period. Should a driver cancel a policy early, insurers pay back any prepaid portion of the premium, but they also charge an administrative fee for early cancellation. This is usually a prorated amount covering the amount of time left in the policy’s term. If it’s soon after the policy started, the administrative fee is much higher than if there were only a month or two remaining.

Therefore, if a driver finds a better price on auto insurance, they need to consider the refund minus early cancellation fees to evaluate if there are cost savings to early cancellation.

Consequences of Lapsed Auto Insurance

If a driver finds cheaper car insurance, they may simply start paying the new company while simultaneously discontinuing payments to the previous company. While the driver maintains the legal requirement of car insurance coverage, status with the original insurer will likely cause issues.

Non-payment of premiums puts a driver on the fast track to high risk status. That’s right, that driver could be placed into the same category as dangerous drivers or those with DUI convictions. Repeated non-payment increases the chances that no insurance company in the regular auto insurance market will offer a policy.

Should the driver’s insurance industry status change, it’s possible that their current insurer may cancel their policy. This could lead to uninsured status.

Driving Without Insurance

driving without insurance


Driving on public roads without car insurance is illegal in all provinces and territories. Violations are punishable by fines and suspensions. Drivers in Ontario, for example, face fines between $5,000 and $50,000, as well as accompanying driver’s license suspensions. Conviction on this point fast tracks the driver to high risk status.

High Risk Auto Insurance

If no insurer in the regular market offers a high risk driver a policy, but the driver remains or recovers legal driving status, they can turn to the Facility Association, an industry group created to serve the residual auto insurance market. Policies negotiated through the Facility Association may be extremely expensive, in some cases topping $10,000 annually. It takes time for the impact of high risk status to come off a driver’s record, up to 10 years, depending on the offense. The potential costs for lapsed car insurance greatly outweigh the missed premiums.

Find the lowest cost insurance from the start of your term using Quote Finder’s car insurance calculator. Select ‘car insurance’ from the drop-down box at the top of the page to start your search.

About the Author: Robert Davis

He is an insurance content professional with vast knowledge and a special aptitude and interest in imparting insurance education. He has authored many articles on insurance.

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