When determining your auto insurance premium, your insurance company evaluates a long list of variables, including age, gender, commute, and driving record. Your insurance history (how long you’ve been continuously insured) is also a factor. Generally, the longer you’ve been insured without lapses, the lower your auto insurance premium should be. Routinely being able to make payments without cancelling your policy indicates to insurance companies that you’re a reliable customer. But what happens if you have a lapse in your insurance coverage? Does this affect your chances of getting an affordable auto insurance rate?

Why would I have a lapse in my auto insurance coverage?
A lapse in your auto insurance coverage can happen for various reasons. Perhaps you sold your vehicle or decided not to drive it for a while and didn’t keep your policy active. Or maybe your licence was suspended, and you didn’t maintain your policy. It’s also possible that you couldn’t afford your premium, and your insurer terminated your policy because of delinquent premium payments.

Insurers may consider you a high-risk driver depending on how long you go without coverage. High-risk auto insurance premiums are much more expensive than premiums available to the average driver, and only some insurers may be willing to cover you.

Will a lapse in my coverage increase my premium?
If your insurer cancels your policy for a negative reason, you may see an increase in your next auto insurance premium with another insurer.

Reasons an insurer may cancel your policy include:

• Non-payment. If you fail to pay your premium, your insurer may cancel your policy¹.
• Licence suspension. For example, if your driver’s licence is suspended because you violated a law, your insurer may cancel your policy¹. Furthermore, if you’re convicted of driving without insurance during the lapse in coverage, you could also face an even higher insurance premium when you re-apply¹.
• Fraud or failure to disclose information. Your insurer may cancel your policy if you misrepresent or conceal facts regarding your driving record or profile¹. For example, suppose you listed a fake postal code on your application to avoid paying a higher premium based on where you live.

The premium impact varies depending on the cause of the lapse. However, the length of time you go without insurance plays a significant role. In some provinces, if you exceed a specified number of months without auto insurance, you may be treated like a new driver when you try to re-apply for a policy. Some insurers consider having no previous insurance history or driving experience riskier than having a violation on your driving record and may charge you accordingly.

Does any lapse in my coverage affect my rate?
If you have a lapse in your auto insurance history for an innocent reason, you may not see a rate increase, especially if you live in Ontario¹. Since November 1996, Ontario insurers have been prohibited from using lapses in coverage as a rating variable¹. In other words, insurers can’t consider lapses in coverage when determining drivers’ insurance rates for reasons other than the ones listed above.

Suppose you no longer need auto insurance because you no longer own a vehicle – it will be noted in your policy. As long as you pay the applicable cancellation fees before cancelling your policy, this may not affect your premium if you choose to re-apply later.

Not every lapse will affect premiums equally¹. For example, a lapse resulting from a person's failure to pay their premium won’t necessarily have the same effect as a person convicted of driving without insurance¹. However, this doesn't mean you can ignore your bills. It's crucial to take proactive measures and prevent lapses in your coverage, particularly when switching insurers. A single day without coverage can lead to serious consequences or leave you liable for damages in the event of a collision.

How do I avoid a lapse in my auto insurance coverage?
The best way to avoid a lapse in coverage is to maintain your auto insurance policy continuously. If that’s not an option, the next best way is to have yourself added to another person’s existing policy. For example, if you’re a parent and your child is a student who attends school in a different city, some insurers will allow you to add them to your policy while they’re away from home. Having them listed as a secondary driver still demonstrates active coverage and counts towards their insurance history. Alternatively, if you’re driving less than before, consider usage-based insurance (UBI), a flexible option that adjusts your premium based on your driving behaviours, such as distance, time, and speed.

If you're a current OTIP policyholder, contact us at 1-833-615-9329 to review your existing auto insurance policy. If you’re not insured with OTIP and are shopping for auto insurance, call us at 1-833-494-0085 to get a quote and receive a $20 gift card of your choice!
 

1. Financial Services Regulatory Authority of Ontario – Regulation on lapse in automobile insurance coverage