What Are the Consequences of Lapses in Your Car Insurance History?

3 minutes can save you hundreds. Enter your postal code below and join thousands of Canadians saving on car insurance.

Secure. No Spam. No Fees.

Why Use MyChoice

MyChoice.ca is an independent platform that helps Canadians find their best insurance options and make informed financial decisions. Our service is free to use. We may earn a commission from some providers when you buy a policy, but it never affects the price you pay or how products are reviewed. To help ensure accuracy, our content is researched and reviewed by licensed insurance professionals before publication.

Article Contents
By Aren Mirzaian
First published on February 13, 2025

4 minute read

MyChoice follows a strict content review process designed to ensure reliable and unbiased information.

Article Contents

In Canada, continuous vehicle coverage is a legal requirement. However, drivers may occasionally find lapses in their car insurance history due to missed payments, shifting insurers, or periods of low usage. 

Whatever the reason, lapses in your car insurance history can lead to significant consequences, including higher premiums or legal debacles. Explore what happens when there’s a break in your car insurance and what you can do to avoid the consequences.

Lapses in Car Insurance History At a Glance

  • Allowing your auto insurance policy to lapse can have significant legal and financial ramifications. You may find it harder to renew your policy or apply for a new one.
  • Lapses in coverage can occur for many reasons, whether you are experiencing financial distress or simply forget about your policy’s expiration date.
  • Preventing insurance lapses is critical to keeping your insurance premiums low and getting the best coverage options.
Close
YouTube

Why Insurers Care About Lapses in Coverage

Insurers care about coverage lapses because they perceive the policyholder as a higher risk. Think of it like credit scoring: On average, people with higher credit scores have fewer and smaller claims. The same goes for auto insurance. Why insurers perceive you as a higher risk might be because of the following reasons:

A continuous insurance history indicates a responsible driver. A break in insurance tells insurers that you may not be as reliable, which can lead to coverage denial.

Coverage lapses indicate financial instability and an inability to pay premiums on time. 

Most insurers believe drivers with coverage lapses are likelier to file a claim when they are insured again.

Canadian law mandates continuous auto insurance for all drivers. Insurers don’t want to deal with drivers who have legal or regulatory issues.

The Underwriting Process and Lapses in Coverage

The underwriting process is critical to how insurance companies price policies for drivers. One of the factors insurers consider most heavily during this process is a driver’s insurance history. 

Gaps in coverage can raise red flags because they suggest that a driver may struggle to maintain their policy or imply a higher likelihood of filing a claim. These gaps can cause insurers to raise premiums, and some companies may be reluctant to provide coverage altogether.

What Are the Consequences of Lapses in Your Car Insurance History?

Lapses in car insurance history can significantly impact your insurance premiums and coverage options. Here’s a breakdown of the potential impact of frequent lapses.

Higher Premiums

More often than not, lapses in insurance history lead to higher premiums. How much your premiums increase depends on several factors, including the length of the lapse. Short-term lapses under 30 days don’t receive significant increases, whereas longer lapses over 30 days can lead to average increases of 35%. 

The reason for the lapse can also determine how much your premiums rise. Insurers are often understanding of lapses due to financial hardships or policy switches, but lapses due to legal issues or non-payment can lead to increases of up to 50%. 

Insurance rates and penalties for lapses may also vary across provinces.

Limited Coverage Options

Insurance companies – whether your existing one or a new provider – may hesitate to give you coverage if you have a frequent history of lapses. In a best-case scenario, your insurer may still renew your coverage but offer limited options or impose higher deductibles. 

Stricter Underwriting Process

Renewing your insurance policy after a lapse puts you under stricter scrutiny. Underwriters will examine your history more closely and may ask for additional documentation, such as previous claims, proof of prior insurance, proof of payment/non-payment, and a written explanation for why your coverage lapsed. Because of this stricter underwriting process, renewing your policy can also take significantly longer.

Fines and Penalties

In Canada, driving without insurance is illegal, so if you’re caught driving with expired coverage, you can receive a fine between $500 and $5,000 (or more). Ontario, in particular, charges some of the highest penalties for driving with lapsed coverage. Most insurers charge between $5,000 and $25,000 for individuals and up to $50,000 for corporations. 

Other penalties include licence suspension, with a period of 30 days to one year. How long your licence is suspended depends on whether you’ve made a first or repeat offence. 

Vehicle Impoundment

Depending on your province, a lapse in coverage means you risk your vehicle getting impounded. Authorities may keep your vehicle impounded until you provide proof of valid insurance, and you may have to pay for impounding fees.

Consequences of Car Insurance Lapses

How to Keep Your Insurance History from Lapsing

Keeping your insurance history updated is vital to avoiding legal and financial consequences. Here’s what you can do to keep your insurance history from lapsing.

Set Reminders or Automate Payments

Setting reminders is the simplest way to ensure your insurance is paid on time. If you’re renewing your policy, remind yourself to review it before it expires to review your options and make the necessary updates. Use a physical calendar or set alarms on your smartphone. 

Alternatively, you can arrange automated payments with your insurer. If your payment method changes, update your details.

Communicate with Your Insurer

Financial difficulties may be inevitable. If you think you might miss a payment, contact your insurer before it is due to see if they offer flexible payment plans or find another temporary solution.

Maintain Proof of Coverage

If you’re switching insurers or need to temporarily stop your insurance, maintain proof of coverage so your provider knows your insurance status. Document any moves so your insurer can send renewal notifications to the correct address.

Have a Backup Plan

If you are unsure how to pay your insurance premiums or renew, have a backup plan. Consider setting aside money for unexpected financial setbacks or setting up a temporary coverage plan. 

If you’re in between policies, consider short-term insurance options, such as a pay-per-mile policy, which lasts from a few days to months. 

Key Advice From MyChoice

  • Be meticulous when documenting your proof of insurance. Keep a folder of your past insurance policies, proof of address, and a comprehensive driving record.
  • Consider working with a broker or agent to help you track your policy. They can also help you find the most competitive insurance rates.
  • Check for policy gaps when changing vehicles or consider transferring coverage from one vehicle to another. 
  • Get non-owner car insurance if you plan to drive a vehicle that isn’t yours. This can be helpful if you’re driving a friend or family member’s car. Alternatively, if you can’t pay for a policy, stay on a family policy for the short term.
By Aren Mirzaian

With over a decade in Canada’s insurance sector, Aren is a leading voice in the industry, providing thought leadership on auto insurance, underwriting innovation, and how technology is reshaping insurance.

Congratulations! You made it to the end!

Now, here is the easy part: complete your quote in under 2 minutes
  • Secure. No Spam. No Fees.

Discover More About

Does Auto Insurance Cover Wildlife Collisions in Ontario?
July 30, 2026
Learn what happens if you hit a deer or other wildlife in Ontario, which auto insurance coverage pays, and what to do after a collision.
Read full article
Car Write-Offs: How It Works & What Happens
July 23, 2026
What happens if your car is declared a total loss in Ontario? Learn how insurers calculate payouts, when vehicles are written off, and how OPCF 43 protects you.
Read full article
How Insurance Fraud Drives Up Auto Insurance Costs in Ontario
July 8, 2026
Staged collisions, re-VINing, fake documents and repair fraud cost insurers millions each year. Learn how that affects your premiums in Ontario.
Read full article

Even More Ways To Save on Insurance