Staying up-to-date on payments is an essential part of protecting yourself and your assets. However, life can throw unexpected challenges our way, and missed insurance payments can happen. As an insurance consumer, it's vital to understand the implications of such situations and what could happen if you're cancelled for non-payment. This short article will breakdown the implications of being cancelled for non-payment and some of the challenges that come with that.
How Does Someone Get Cancelled for Non-Payment?
A client can have their insurance lapse if they fail to pay for their insurance on time. Depending on your insurance provider, the amount of time between a first missed payment and a cancellation for non-payment can vary. It is usually 40-60 days between missed insurance payments and cancellation for non-payment.
What Happens After You’re Cancelled for Non-Payment on Your Insurance?
When you’re cancelled for non-payment, there are multiple challenges that arise. Some of the challenges include:
- Repayment requirements
- Loss of monthly payments
- Difficulty re-acquiring insurance
Repayment Requirements
If you’re cancelled for non-payment, you are still required to pay the amount owed for the “time on risk”. Time on risk refers to the time you were insured on the policy, to the time you were cancelled for non-payment. If you were making monthly payments on your insurance starting in January and you missed your payments for April and May, you could be cancelled for non-payment. If you were to be cancelled for non-payment you would still owe the insurance company for coverage you had between your last payment and when you were cancelled for non-payment. This includes any NSF fees or interest.
All of that to say, if you're cancelled for non-payment, you'll still need to pay your insurance fees and any additional NSF or associated fees to your insurance company before you can regain insurance.
Loss of Monthly Payments
If you are on an insurance payment plan (either three pay, four pay, or monthly payments) and get cancelled for non-payment, it can be incredibly difficult to regain a payment plan through the insurance company. If you’re with a brokerage like Armour Insurance, we can use a third-party financing company to help bridge the gap between annual payments and monthly payments.
Difficulty Re-Acquiring Insurance
If you’re cancelled for non-payment, you will need to repay the insurance company for time on risk. If you were cancelled for non-payment on a car insurance policy, you cannot get a new car insurance policy until you’ve completed your payments. You can get other insurance policies (such as property insurance) if you still owe money on a car insurance policy.
Even when your debt has been repaid, it can still be difficult to regain insurance coverage. Many companies will not offer collision or comprehensive coverage to clients who have been cancelled for non-payment. Note that if a vehicle is being financed, you are required to maintain collision and comprehensive coverage.
Getting your Insurance Re-instated after being Cancelled for Non-Payment
Getting your insurance policy reinstated after being cancelled for non-payment varies depending on the company. If you've been cancelled for non-payment, talking your agent or your broker is the best first move. They may be able to help reinstate your coverage with your current company with fewer drawbacks.
Aviva Is Now Charging Reinstatement Fees if Cancelled for Non-Payment
On July 19, 2023, Aviva Canada announced that they will be charging clients a $60 reinstatement fee for personal insurance policies that were cancelled due to non-payment. This change is being made across Canada for Aviva personal insurance and will come into effect October 1, 2023, for all existing clients and new clients.
WHAT Should I DO IF I'm GOING TO MISS A PAYMENT On My Insurance?
If you know, or think you might miss a payment, your first step should always be to call your broker. Never ignore it. If you receive a registered letter of cancellation, always call your broker immediately. Call your insurance broker at your first opportunity to arrange payment options. They may be able to save you a whole bunch of grief on your insurance.
Calling 5 business days prior to your payment coming out will allow you the most flexibility on payment options. It is always better to call and get in touch with your broker than it is to let your policy lapse. As brokers, we're here to help.
