What Happens If I Miss a Payment on Home or Auto Insurance?

By Liam Lahey
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As the COVID-19 lockdown stretches on for the foreseeable future, drivers and homeowners may be fretting about their finances during the economic downturn. That might lead you to make tough decisions about what bills you can pay on time and what you can’t. Among those concerns, what happens if you miss a payment on your home insurance or auto insurance?

These are challenging times for a majority of Canadians. The coronavirus pandemic has upended our usual routines, not to mention our country’s economy. A recent Leger survey about the impacts of COVID-19 finds 65% of Canadians believe the worst is yet to come. Moreover, 45% are experiencing a decrease in income, and 22% think they will have difficulty paying their mortgage or rent.

Insofar as your insurance bill goes, under normal conditions you may face repercussions if you fail to pay it on time. Missing more than one payment can have more significant consequences. But here’s the good news: though we are caught in an extraordinary circumstance, many insurance companies are striving to offer allowances for consumers who are struggling to make their payments.

For example, if the province you live in has declared a state of emergency, some companies are allowing their customers to miss a payment and will spread it out over the balance of the year while waiving any non-sufficient funds (NSF) fees. Others will not cancel your coverage if you have missed a payment because you lost your job, or they are extending their grace periods for renewals and payment dates. Check with your insurer or broker to find out what your options may be.

What Happens If I Miss a Car Insurance Payment Because of COVID-19?

Typically, if you miss making multiple payments on your auto insurance premium, your car insurance policy will be cancelled. Prior to doing this however, your insurance company is obligated to warn you of the missed payment and let you know of the action they plan to take. Your best option is to be proactive. Contact your insurer or broker before you miss a payment to let them know you are facing financial difficulties. Many insurers will work with their customers to provide different payment options.

In Ontario, the Financial Services Regulatory Authority’s (FSRA) Auto Insurance Consumers’ Bill of Rights states you have the right to keep your auto policy in place for up to 30 days “following one or two non-sufficient fund (NSF) situations”. However, the bill of rights also states you must pay your premium in a timely fashion. If you fail to pay within that allotted time, though, your auto insurance will be cancelled. You may face NSF fees, and you will not be allowed to drive your car (it is illegal to drive any vehicle in Canada without car insurance).

In Alberta, the province’s Consumer Bill of Rights outlines your protections when buying goods or signing contracts. As far as missing monthly auto insurance payments go, Albertans face similar consequences Ontarians do.

If you have a history of auto insurance non-payments, that may complicate matters. Firstly, if you have a history of missed payments, you may be classified as a high-risk driver by all insurers, which makes getting a low premium more challenging. You could face difficulties obtaining insurance from other companies. Secondly, a record of non-payments may stay on your insurance record for up to three years. If you don’t pay by a specific date, an insurance company may send it to a collection agency, which can affect your credit score.

You could take the step of cancelling your auto policy, but doing so may hurt you in the long run as some insurance companies may charge you a small penalty for cancelling prematurely. Additionally, if there is a gap in your coverage, it may affect your driver rating and pricing. A better way to go may involve suspending or reducing your auto insurance coverage until things perk up and you’re in a stronger financial position.

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What Happens If I Miss a Home Insurance Payment Because of COVID-19?

Unlike auto insurance, you are not legally required to have home insurance in either Ontario or Alberta. With that said, most mortgage lenders require homebuyers to have insurance to protect their properties and homes – buying a home or condominium is, after all, the most significant financial commitment you will make in your lifetime. Leaving your most important asset uninsured is not a good idea.

If you are worried you may not be able to pay your monthly home insurance premium on time, take heart: some home, condo, and tenant insurance providers are deferring payments and cancellations due to non-payment. Not all insurers are taking those steps, though. Be sure to call your provider before you miss making a payment and find out how they can help you.

However, missing multiple home insurance payments and having your policy cancelled makes the situation murky. It can be daunting to get a new home insurance policy if your existing policy is cancelled because of several non-payments. Insurers may not extend coverage to you, or they may jack up your rate if you are labelled high risk.

What to Do If You Will Miss a Payment on Your Home or Auto Insurance

If you think you may miss a payment on either your home, condo, or tenant insurance policy or your auto insurance policy, consider taking these steps:

  • Call Your Insurance Company or Broker. This should be the first thing you do. Don’t be idle and hope no one notices you missed a payment. Call your insurer or broker in advance to explain what your challenges are and inquire about arranging payment options. Some insurance companies may forgive you for missing one payment because of the COVID-19 lockdown and its impact on your finances.
  • Contact Your Financial Institution. It may be worthwhile to contact your bank or credit union to ask about adding overdraft protection to your account. That will give you a bit of a buffer if a payment date precedes the date when income is deposited into your account.
  • Set Reminder Notices on Your Phone. We all rely on our mobile devices to keep us on top of our daily tasks. So, set payment reminders on your smartphone or email calendar to ensure you don’t miss any payment deadlines.
  • Build an Emergency Fund. If it’s possible, set aside money to ensure you have sufficient funds for scheduled insurance payments.