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If you have car insurance, there is often a chit chat about who got a good insurance deal and pays less in your social circle. Well, the price could be one of the reasons that you may think of switching your car insurance. There could be many other factors such as incompetent staff or bad claims experience etc. All motorists are required to have car insurance in Ontario.

So, when you decide to cancel your insurance and do have a car, you have to choose a new policy to take effect. As an auto insurance consumer, Ontario’s Auto Insurance Bill of Rights gives you the privilege to choose your insurer. You may request cancellation or changes to your policy at any time for any reason. Whether you got a better provider or are moving out of the country, you may cancel your policy mid-term or at renewal.

How To Cancel Your Car Insurance Policy

If you are wondering that you could stop payments to cancel the policy, it’s just not a good plan. The insurance company may consider that you have been defaulting on payments and then give your written notice. If you choose to ignore then, within 45-60 days, the insurer could cancel your policy. This cancellation puts you in the high-risk category as a policyholder.

If you decide to cancel your car insurance midterm, it is a good idea to check your provider’s cancellation terms. It may be better to cancel at renewal. Check with your insurance provider and confirm how much would be the cancellation fee. Inform your insurance provider in writing that you wish to cancel your policy. Mention the policy number, names and signatures of all policyholders, vehicle and driver details, the effective date of cancellation etc. in the letter.  It is very crucial that your letter to the insurer has clear information so that the policy is canceled as per your instructions. Whether you send it by email, fax or post there is less room for error when everything is in writing.

What Happens When You Cancel Car Insurance 

When you have opted to cancel your car insurance, it is very crucial that you arrange for the new policy to start the same effective day of cancellation.  This will avoid any gap in insurance. Once there is a gap in the insurance, your insured status is very vague. This could put you in a high-risk category. Then when you shop for a new policy you may have to pay higher premiums. You may also lose some loyalty discounts and multi-policy discounts.

How Much Does It Cost To Cancel Your Car Insurance

There could be a penalty payable when you decide to cancel your car insurance midterm. It is wise if you do your math rather than pay out hefty fee. There may be additional administrative costs and penalties for the loss of premiums based on when and why you want to cancel. You may follow the below 5 steps to check if your decision to switch midterm is justified or not.

  1. Check with your insurance provider about the cancellation fee and regular premium payments.
  2. Find out how much are your monthly premiums. Then, multiply it by the number of months remaining until the renewal on your policy and make a note of the result.
  3. Now get the monthly premium amounts for your new policy and multiply by the number of months remaining on the old policy and write down the result.
  4. You have calculated two results in step 2 and 3. Now, you may subtract both and find out the difference amount. This amount is the savings for switching to the new policy.
  5. If this amount is less than your cancellation costs, then it may not be really worth to cancel the policy midterm. It is also good to know if your insurer uses prorate or short rate cancellation.

If I Cancel My Car Insurance Do I Get A Refund

refund policy


The cancellation terms and conditions for insurance companies vary in terms of the refund policy. The short rate cancellation table cited in the Ontario Automobile Policy is used by most insurers to calculate early cancellation penalty. There may be no penalty when you cancel at renewal.

While calculating refunds, the companies may use the prorated method or short rated method. If your refunds are prorated, you may get a full refund equal to the unused premium. While your refunds are short rated, you could expect to get a refund for the unused premium minus the penalty for early cancellation.


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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