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The Consequences of Missing Insurance Payments

The Consequences of Missing Insurance Payments
Many Canadians are finding it increasingly difficult to meet their household financial needs. According to StatsCan, one in four Canadians is currently struggling to make ends meet. With the rising costs of housing, food, and other necessities, some families find themselves in tough places and have to choose which monthly bills they can afford.

And because life happens, so do missed payments for reasons such as switching bank accounts, having an emergency, or simply forgetting to pay.

What Happens When You Miss an Insurance Payment?

Following a missed insurance payment, most insurers will take the following steps:

1. Send a notification making you aware of your missed payment
2. Provide you with whatever grace period your policy terms may outline to make the payment
3. Inform you of what will occur if you fail to make your payment before the grace period ends

Grace periods vary by insurer and can be 7 days, 15 days, 30 days, etc. It’s best to contact your insurer as soon as you’ve missed an insurance payment or before if you think you may miss an upcoming payment).

Non-Payment: What You Need to Know

Non-payment is a serious issue that may result in your insurance coverage being cancelled. This usually happens after two missed payments, during which time you received a missed payment notice but still failed to remedy the issue.

Following your failure to remedy the non-payment after two notices, you will receive a registered letter (either via mail or virtually, depending if you opted for paperless notifications), and your policy may be cancelled. Note that once you are cancelled and switch to a new provider, what you owe to your previous insurance company will still need to be paid. Failure to pay may result in this being sent to collections which impacts your credit rating. Additionally, your new company may not be willing to insure you until your debt has been settled.

How Does Cancellation Affect Your Insurance?

Having an insurer decide to cancel your policy and you choosing to cancel your coverage are two very different things with significantly different future implications. The former, due to non-payment, has severe insurance implications and will significantly decrease your options for getting insured again.

Even brokers who work with dozens of insurance companies may be challenged to find a new insurer willing to work with a person with cancelled insurance on their record.

After a cancelled policy, with fewer insurance companies willing to work with you, your payment options may also become limited. Prior to a cancellation for non-payment, you would have had the choice of monthly payments. However, a person who has cancelled due to non-payment may only have the option to pay for their entire policy upfront. Suddenly, that missed $200 payment becomes a $2,400 one - and it’s due immediately.

Future Insurance Rates

A cancellation can have more implications than solely raising your insurance rates and/or limiting your payment options. Being cancelled on your auto insurance means you can’t drive until you have secured new coverage. In Canada, driving without auto insurance is illegal.

What to Do If You Think You’re Going to Miss an Insurance Payment?

If you think you might miss a monthly payment on your home, auto, condo, tenant, or another type of insurance policy, there are a few things you can do. As always, it’s better to be proactive than reactive. If you’ve waited until your insurer sends a non-payment cancellation notice and it’s 15 days or less before that date, there’s likely nothing you can do to avoid cancellation.

Here’s some tips if you’re worried about missing an upcoming payment:

1. Notify your broker if a payment won’t clear
2. Ask your broker if your insurer offers payment via a monthly credit card
3. Set up automatic reminders or sign up for automatic withdrawals

Missing insurance payments can have severe consequences, from higher premiums to limited options for coverage and immediate financial burdens. It’s crucial to make every effort to keep up with insurance payments to avoid these implications. Reach out to us if we can assist you: 1-800-679-2640