Gaps in Auto Insurance Coverage

Have you had a gap or a lapse in your auto insurance coverage and wonder what that might mean to your insurance premium?

When a Gap Will Hurt You

According to the Insurance Bureau of Canada, a consumer cannot be penalized for a lapse in insurance coverage, unless one of the following has occurred and was the reason for your policy being cancelled:

  • Non-payment of premium;
  • Your driver's licence was suspended because of a conviction related to the use or operation of the automobile (e.g., impaired driving);
  • An accident or conviction happened that would result in higher premiums, but you did not notify your insurance company; for example, you had an accident and destroyed your vehicle and did not advise the insurance company.

How to Prevent Harmful Lapses

Let your broker/agent know if you want to cancel your policy or are planning to have a lapse in your coverage. If you have sold your car and do not plan to replace it for a while, are moving out of the country temporarily, or are going to drive a company car and don't need your own vehicle, you will want to have proof that you have had prior insurance if you want insurance coverage at a later date.

Proof of Prior Insurance

Here are a couple of things that you need to do that will prove you had prior insurance, and these might even get you a lower rate when it’s time to get a new policy:

  1. Obtain an letter (typically called an "experience letter") from your agent or broker outlining your policy number, insurance company, time insured, accident and conviction history. File this letter for later use. Or,
  2. Write down the reason for your lapse in insurance and make two copies. Give one to the broker/agent and have him or her date and sign the second copy to keep for your records. This provides you with documentation when you need insurance again, if that broker/agent is no longer available to verify your lapse in coverage. Also keep a copy of your latest insurance policy.

An individual with a lapse in insurance no longer accumulates risk points in the Facility Association so you will not be considered a high "risk driver".

The insurance rate you pay is based on your driving record and claims history. If you are applying for new car insurance after a gap, the insurance company may not be able to give you the best possible rate without proof of your history. If you can’t prove that you have a good driving history and are claims-free, you may pay more. Getting either of the two options mentioned above may help keep you from overpaying for your insurance in the future.