This article has been updated from a previous version.
You must have car insurance to drive, but does your car insurance have to cover you? Not always.
Your auto insurance policy is a contract, and like any contract, both parties need to agree to specific terms for the agreement to remain valid. If these terms are not met, your insurance provider may not — and most likely won’t — pay out.
Here are seven situations where your insurance company may refuse to pay for losses or damages in the event of a claim.
1. Non-disclosure or misrepresentation
Suppose you are not truthful when applying for auto insurance and your insurance provider finds out. In that case, you could see increases to your auto insurance premium, or it could void your policy entirely, meaning you would not have protection in the event of a claim.
What would be considered non-disclosure or misrepresentation? A few examples are falsely listing your home address as another, omitting a secondary driver, or not telling your insurance provider that you use your car to deliver pizzas.
2. Insurance fraud
According to the Insurance Bureau of Canada, auto insurance fraud costs Canadians more than $1 billion annually. That is why insurance providers take this type of crime very seriously, denying claims and cancelling the policies of those who commit such acts.
Some examples of auto insurance fraud include:
- Lying about the way a loss occurred
- Receiving payments for medical treatments or services not rendered
- Including previous damages in an insurance claim
It may be difficult to secure auto insurance from another provider once insurance fraud is on your record.
3. Failing to report car modifications
Vehicle modifications can increase claims risk from an insurance company’s perspective. For instance, some modifications may make a vehicle more susceptible to theft. Others improve a vehicle’s performance, possibly increasing the speed above the standard specifications.
An insurance provider can refuse to pay a claim if you have not disclosed vehicle modifications leaving you out of pocket and potentially without coverage.
4. Driving under the influence
Suppose alcohol or cannabis use is found to have played a role in a collision, whether you were driving or someone else was driving your vehicle with your permission. In that case, your insurance provider may deny payment for loss or damages caused to your car.
5. Illegal activities and convictions
Additionally, if, as a result of a collision, you are convicted under the Criminal Code for any of the below offences or any similar law in Canada or the United States, it is unlikely your insurance provider will pay out:
- Causing bodily harm by criminal negligence
- Dangerous operation of a motor vehicle
- Failure to stop at the scene of a collision
- Refusal to comply with the demand for a breath sample
- Causing bodily harm operating a vehicle while impaired or over 80 mg of alcohol in the blood, or
- Operating a motor vehicle while disqualified from doing so
If you are using your vehicle for any purpose that is against the law, your insurance provider may not cover your damages in the event of a collision.
This includes permitting your car to be used in a race, speed test or other illegal activity, driving the automobile while not authorized by law, or allowing someone else to operate your vehicle under any of these conditions. These exclusions should be outlined in your auto insurance policy.
6. Failing to pay your premium
Missing auto insurance payments can default your insurance. If you are going to miss or be late on a payment, talk to your insurance provider first to prevent a non-payment cancellation. Being honest with your auto insurance provider can help ensure your coverage is still there when you need it most.
What to do if your policy is cancelled for non-payment
An insurance provider can cancel your policy for non-payment. Typically, if you miss a payment, you’ll be sent a registered letter that gives you a certain number of days to pay the arrears (plus, potentially, an administration fee.)
If you pay what is owed on time, your policy will stay in force. Of course, there’s a limit to how many times this can happen. In Ontario, for example, your insurance provider will only allow for two instances of late payment (that results in them having to send a notice). The third time, the notice you’ll receive will inform you that your policy will be cancelled.
If your policy is cancelled, you won’t be able to drive until you can get car insurance coverage. When you do, it will likely be more expensive with a cancellation on your record, and you may have to pay your premium upfront. Compare auto insurance quotes to ensure you pay the lowest possible price, no matter what obstacles you face.
7. Using your vehicle as a taxi
With rideshare services being prevalent in parts of Canada, some drivers are using their vehicles as a taxi without having commercial auto insurance. An insurance policy specifically for rideshare services can protect Uber and Lyft drivers.
Using your personal auto insurance may leave you underinsured. If you’re entertaining joining a ride-sharing program to make some money on the side, ensure you talk to your insurance provider to get the coverage you need.
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