What are the consequences of late or missed auto insurance payments?

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Not paying your premium on time (or not at all) can have a big impact on your policy, as well as your credit.

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Between the rising cost of living and the financial challenges spurred by the pandemic, more and more Canadians appear to be struggling to meet their financial obligations.

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According to the month of October 2021 MNP Consumer Debt Index Nearly half (46 percent) of Canadians say they are $ 200 or less from financial solvency each month, and 27 percent say they don’t earn enough to pay their bills and debts.

It’s a tough place to live, especially when it comes to following car insurance Payments. But the consequences of late or missed payments can have far-reaching effects.

What happens when you don’t pay your auto insurance premium on time?

“The biggest consequence of a missed auto insurance premium is the cancellation of your auto insurance policy,” says Anne Marie Thomas, director of consumer and industry relations at the Insurance Bureau of Canada.

Most people pay their insurance premiums through automatic bank withdrawals or credit card payments. If the money isn’t there when the insurance company makes its withdrawal, it will usually send a missed payment notice and give the policyholder a certain number of days to catch up, she says.

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And, if the monthly premium is still not paid, the insurance provider will likely send another notice by registered mail – a Canada Post service that guarantees proof of delivery.

“Some people don’t pick up registered mail and don’t know their policy is canceled,” says Thomas.

In the worst case, they might only find that their the insurance has been canceled if he is arrested by the police. In a province like Ontario, driving without insurance costs up to $ 10,000 for a first offense, says Thomas. The costs could be even higher if vehicles are damaged, or worse, if someone is injured.

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How Can Late / Skipped Auto Insurance Payments Affect Your Credit Report?

Late or missed payments are also important, especially when they result in cancellations, as they can show up on your Autoplus report, which insurers use instead of credit reports when assessing a candidate for funding. assurance.

With this information, insurance companies can decide whether to deny an insurance claim or increase your premium, Thomas explains. “It shows the new insurance company what kind of [customer] you were with the old insurance company.

While your credit score cannot influence whether or not you purchase auto insurance, a missed payment could potentially affect your credit.

Auto insurance companies themselves don’t report late payments to credit bureaus, at least not with Equifax, says Julie Kuzmic, senior consumer defense compliance officer at Equifax Canada.

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“That means you wouldn’t see standard auto insurance premium payment information on credit reports the same way you might see it on credit card payments,” she says. “If it’s not on the credit report, it can’t be included in the credit score calculations. “

However, if a late or missed auto insurance payment ends up with a collection agency, that information can be reported to a credit reporting agency, which could have a negative effect on your credit score.

What Should You Do If You Know You Cannot Pay For Your Auto Insurance?

If you think you might not be able to make an auto insurance payment on time, always contact your broker or the insurance company directly, Thomas says.

“During the pandemic, insurance companies were quite flexible and realized that a lot of people were out of work or maybe their hours were reduced. They were understanding and offered different payment options.

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To avoid any risk of late payments, Thomas also recommends that drivers pay for their auto insurance annually instead of monthly. If they have to stick to it monthly, however, she advises people to check their bank and credit card accounts each month to make sure the payment has been withdrawn.

“We should never assume with our automatic payments that everything will be fine because the bank won’t be the one to suffer if there is an error on your account,” she said.

And, if you’re purchasing new insurance, make sure you’ve officially canceled your old policy. Don’t assume it was done for you because you don’t want it to appear as non-payment either.

” Do not let [your auto insurance payments] deadline, ”she said. “It really creates more problems than we think. “

Lowest Rates.ca is a free, independent rate comparison website that allows Canadians to compare rates from over 75 providers for a variety of financial products, such as home and auto insurance, mortgages, and credit cards.

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