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Sunday, September 25, 2022

Auto Insurance Cancellation Fee: How Much Does It Cost?

Automobile insurance happens to be a statutory obligation in Canada. However, there are situations when you would want to cancel your car insurance. 

You might find a better deal or plan to switch your car. In case you decide to cancel ongoing insurance, you need to shell out an auto insurance cancellation fee Ontario. 

Regardless of why you are cancelling the policy, make sure to consult an insurance expert like Surex. Click here to find more information about these experts who can guide you to keep the expenses to a minimum.

In today’s blog post, we will tell you how much fee you need to pay to cancel your car insurance in Canada.

Why do drivers cancel car insurance policies in Canada?

You might face situations that would compel you to cancel your car insurance policy.

  • The most common reason for cancelling your auto insurance policy is that you might be unhappy with your current scheme’s provisions. 
  • Secondly, owners look out for affordable policies. If unsatisfied with the high premium, you may look for an alternative policy with lower premiums.
  • Poor customer service from the car insurance company can also lead you to think otherwise.
  • Many owners buy a car insurance policy and then decide to combine it with their home insurance policy later. In these cases, you may discontinue the original car insurance scheme.

Whatever the reason for getting a new policy, you need to fork out a cancellation fee auto insurance when discontinuing the package.

What is the auto insurance cancellation fee in Canada?

The cancellation penalties or fees for discontinuing your automobile insurance vary significantly. This value can be as low as just $25. However, in some situations, it can be even high, maybe a certain percentage of your premium. In general, this varies between 2% and 7%. Therefore, it makes sense to consult the insurance experts or go through the fine print before deciding.

In case you want to change your car insurance policy, the best time would be during the renewal. Insurance experts can help you obtain multiple quotes from leading insurance companies and recommend the right one. Besides, you can cancel the existing policy at no additional cost and switch to a new one.

How much of a refund can you get when you cancel your car insurance policy?

There’s no point paying the cancellation fee for auto insurance unless you get some refund, right?

You are eligible for a refund when you cancel your car insurance policy. The amount might vary depending on the time of the coverage tenure. If the insurer allows a pro-rated cancellation, you will get a complete refund on the unused premium. In case of a short-rate cancellation, they would retain a certain percentage of the refund as a penalty. However, under this mechanism, you can get as much as 90% refund of your pro-rata.

Now, for car owners, it’s imperative to be vigilant of possible gaps that might arise when you cancel a policy. If the car remains outside an insurance cover even for a week, the insurer would consider you a high-risk client. Eventually, you would find the premiums spiking. 

So, if you are switching car insurance policies from one company to another, make sure to bridge the gap. You might consider adding yourself to a different car. Alternatively, take care that no lag time gets in between.

Three things to consider before you cancel your car insurance policy

Many drivers tend to switch car insurance policies without giving a second thought to the consequences. Even if you have found a more affordable deal, you need to consider the following factors before you decide on the matter.

1.    Cancellation charges

Consider the auto insurance cancellation fee Ontario that you need to shell out. In case you decide to switch your policy in the middle of the term, you need to pay some fees. Consider whether or not it would be logical enough to fork out the amount, calculating the refund you would get. For instance, if you cancel the policy at ten months of the term, you would be paying lesser cancellation charges than what you would pay at a cancellation at six months.

2.    The discounts you would lose

While moving to another car insurance policy, owners often overlook the discounts. Cancelling the policy would deprive you of accident forgiveness, loyalty discounts, and other benefits.

3.    Additional administrative charges

When you get a new car insurance policy, you need to make fresh deductible payments and shell out some administrative costs. So, this would add to your losses in addition to the cancellation fees. However, if the benefits of the new policy outweigh these losses, it would be wise to switch policies even in the middle of the tenure.

 How to cancel your car insurance policy?

  • First, be vigilant while reading the fine print before you cancel the policy. Unless you read the document with due diligence, you might miss out on something crucial. You might speak to a representative of the insurer or a reputable insurance broker to know the formalities precisely.
  • Ask the insurance company whether or not they want you to follow some specific steps. For instance, you might have to serve a notice period or submit a cancellation letter. In Ontario, this letter is compulsory, and you need to dispatch the same to your car insurance company.
  • Lastly, the insurer will provide you with the cancellation notice. Make sure to obtain a written confirmation. For your records, keep a copy of these documents.

Auto insurance cancellation fee Ontario: How much does it cost? — Final thoughts

Whether you should cancel your car insurance policy in the middle of the term or not presents you with a tricky situation. Unless you are diplomatic enough to figure out your actual gains, you might lose more value than you expect to gain. 

This explains why most car owners consult reputed insurance experts like Surex before switching policies or cancelling the current one. With professional support and advice, you can cancel your policy without losing much value.

 

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