A lapse in coverage does not automatically prove irresponsibility or financial instability. In Ontario, insurers may use a lapse only as permitted by approved rules and Ontario Regulation 664.
Our team looked into Ontario Regulation 664 to check when a coverage lapse may affect classification, the Compulsory Automobile Insurance Act to confirm the rules for operating an uninsured vehicle, and FSRA’s guidance on working with an insurer, agent or broker to explain how to request a written reason for an underwriting decision.
Why Insurers Care About Lapses In Coverage
Where permitted by approved underwriting or classification rules, insurers may increase premiums, limit coverage, decline coverage, or cancel policies when the lapse falls within a circumstance permitted by Ontario Regulation 664.
This can lead to:
Higher Premiums
The effect of your rate increase depends on the permitted classification rule, driver, vehicle, coverage and insurer filing. On average, eligible quote profiles in our Ontario data were up to 20% higher after a permitted policy lapse, according to our internal quote data. Ontario Regulation 664 governs this treatment.
Limited Coverage Options
If an insurer’s approved rules permit it to consider the reason for the gap, it may decline to provide you with full coverage. They may limit their offer to third-party liability insurance, the bare minimum of auto insurance legally required by Ontario.
Stricter Underwriting Process
In the event of a lapse in coverage, insurers may ask for documentation explaining what happened. Insurers may require copies of:
- cancellation notices;
- certificates of insurance from previous insurers;
- a written explanation of the circumstances surrounding the cancellation of coverage;
- proof of payments
If your coverage has been declined, limited, or priced differently because of a gap in insurance, the FSRA advises consumers to ask for the written reason from their insurer for their decision. Insurers have limits on how they can use lapses in coverage and Ontario Regulation 664 outlines the situations where a lapse in coverage can affect the class of insurance used to price your auto policy.
Read More: How to Get Car Insurance After Cancellation in Ontario
What Happens If You’re Driving Without Car Insurance?
The impact that uninsured driving has on your insurance coverage and your licence is dictated by courts and legislation. Insurance companies have no say on fines, penalties, and other consequences for uninsured driving outlined in the Compulsory Automobile Insurance Act and other legislation.
The Compulsory Automobile Insurance Act outlines offences and penalties for driving without valid auto insurance. If you’re charged with operating an uninsured vehicle in Ontario, it’s important to obtain legal representation immediately. A suspension of your driver’s licence could result from an offence of driving without valid insurance.
Vehicle Impoundment
The rules around having your vehicle towed and/or impounded because you were caught driving without valid insurance are separate from the implications of having an inactive policy that’s been cancelled because of non-payment. If your vehicle is impounded because of uninsured driving, you’ll likely have to provide proof of insurance and pay fines before it’s released.
Read More: How to get Your Car out of Impound
How To Keep Your Insurance History From Lapsing
Get ahead of lapses in coverage. Set up pre-authorized payments with your insurer. Add payment due dates to your smartphone’s reminders or calendar app. You can also request flexible payment plans from your insurer. Call your insurance company or broker before your premium comes due if you’re having difficulty making a payment. Insurers may be able to provide some leniency if you’re having financial difficulty.