Yes, you can cancel your car insurance at any time in Canada, but there are important considerations to keep in mind. While insurance providers generally allow policyholders to terminate coverage before the end of the policy term, doing so may involve penalties, fees, or specific procedural steps. This article outlines what you need to know about cancelling car insurance in Canada, including when it’s a good idea, how to do it, and what to avoid.
Is It Legal to Cancel Car Insurance at Any Time?
Limited Time Automotive Amazon DealsYes, under Canadian law, you are allowed to cancel your auto insurance policy at any time. You are not required to wait until the end of the term (usually 6 or 12 months). However, you must notify your insurer and follow proper cancellation procedures. Driving without valid insurance is illegal in Canada, so cancellation must be managed carefully.
Common Reasons for Cancelling Auto Insurance
Policyholders may want to cancel their insurance for several reasons:
| Reason | Description |
|---|---|
| Selling the vehicle | You no longer need insurance if you’ve sold or donated your car. |
| Switching providers | You found a cheaper or better policy elsewhere. |
| No longer driving | You’re taking a break from driving or storing the vehicle long-term. |
| Leaving the country or province | You’re relocating or registering the car elsewhere. |
| Vehicle written off or stolen | The car is no longer operable or insurable. |
How to Cancel Your Car Insurance Properly
Limited Time Automotive Amazon DealsCancelling car insurance is relatively straightforward but requires specific steps:
- Contact your insurer directly: Do not assume that non-payment will cancel your policy. This can hurt your credit and insurance history.
- Provide written notice: Most insurers require cancellation requests in writing, via mail, email, or signed form.
- Provide proof (if required):
- Selling your vehicle? Include the bill of sale.
- Switching to another insurer? Provide the new policy number and insurer details.
- Moving provinces? Include your new address or registration documents.
- Choose an effective date: You can schedule the cancellation in advance. Make sure your new policy begins before the old one ends to avoid a lapse in coverage.
- Return any unused stickers or plates (in provinces where required, such as Ontario or Quebec).
Will There Be Cancellation Fees?
Possibly. Insurers may apply one of two methods when processing cancellations:
| Method | Description |
|---|---|
| Short-rate cancellation | You pay a penalty fee, usually 10% of the unused premium. This method is common if you initiate the cancellation. |
| Pro-rata cancellation | No penalty. You receive a refund based on the exact unused portion of your premium. This usually applies if the insurer cancels the policy. |
Example:
Suppose your annual premium is $1,200, and you cancel 6 months in.
- Pro-rata refund: $600
- Short-rate refund: ~$540 (after 10% penalty on unused premium)
Can You Cancel Car Insurance Without a New Policy?
Yes, but only if you are no longer driving or owning the vehicle. However, never cancel your car insurance while still operating the vehicle, as driving uninsured is illegal in every province.
Penalties for driving without insurance include:
| Province | Fine for Driving Uninsured |
|---|---|
| Ontario | $5,000–$25,000 (first offence) |
| Alberta | Up to $5,000 |
| British Columbia | Minimum $598 |
| Quebec | Up to $2,800 |
| Saskatchewan | Up to $5,000 and vehicle impoundment |
Additionally, lapses in coverage—even if not illegal—can hurt your insurance history and increase future premiums.
What Happens to Your Remaining Premium?
If you’ve prepaid your car insurance (common with annual policies), you may be eligible for a partial refund of the unused premium. This depends on:
- The cancellation method (short-rate vs. pro-rata)
- Your insurer’s refund policy
- Administrative fees
Refunds are typically issued via direct deposit or cheque within 2–4 weeks.
Does Cancelling Insurance Hurt Your Credit Score?
Cancelling a car insurance policy does not impact your credit score directly. However, failing to follow proper procedures—such as simply stopping payments without notifying your insurer—can result in:
- Collection agency involvement
- Missed payments on record
- Difficulty obtaining future coverage
Always cancel formally and keep documentation.
Tips for Cancelling Smartly
- Shop for new coverage before cancelling: This prevents coverage gaps.
- Understand cancellation penalties: Ask your insurer for the exact refund amount and any fees.
- Time your cancellation around major life changes (e.g., moving or car purchase).
- Ask for confirmation in writing that your policy is cancelled.
- Notify your lender if your car is financed or leased—they require continuous insurance.
Exceptions and Special Cases
Some situations may require additional steps or considerations:
| Scenario | Action Required |
|---|---|
| Leased or financed vehicle | You must provide new insurance proof to the lender before cancellation. |
| Moving to another province | Cancel old policy once new vehicle registration and insurance are in place. |
| Multiple drivers on one policy | Cancelling affects all covered drivers—notify each one. |
| Vehicle in long-term storage | Consider “storage insurance” instead of full cancellation. |
Conclusion
Yes, you can cancel your car insurance policy in Canada at any time—but doing so requires careful planning. Whether you’re switching providers, selling your vehicle, or taking a break from driving, make sure to follow your insurer’s process, understand any penalties, and avoid coverage gaps. Always cancel in writing, keep documentation, and ensure your vehicle remains insured if it’s still on the road.
Cancelling responsibly not only protects you legally and financially but also ensures a smooth transition if and when you need insurance again.