How a gap in your car insurance history can affect your rate

By: Zandile Chiwanza on April 16, 2024

This article has been updated from a previous version.

When determining the cost of your annual car insurance premium, insurance companies evaluate a long list of variables, including your age, gender, commute, and driving record.

Your insurance history (how long you’ve been consistently insured for) is also a factor. Generally, the longer you’ve been insured without any lapses or gaps, the lower your car insurance premium should be. Being able to consistently make payments without cancelling your policy shows insurance providers that you’re a trustworthy and reliable customer.

But what happens if you have a gap in your insurance coverage? Does this impact your chances of getting an affordable auto insurance rate?

The answer depends on the cause for the gap, where you live, and your insurance provider. 

Why would I have a gap in my car insurance coverage?

A lapse in your auto insurance coverage can happen for a variety of reasons. Maybe you sold your vehicle or decided not to drive it for a while and didn't pay to keep your policy active. Or perhaps your licence was revoked, and you didn't maintain your policy. It’s also possible you could no longer afford your premium and your insurance company terminated your policy because of premium delinquency. 

Depending on how long you've gone without coverage, insurance providers may consider you a high-risk driver. Premiums for high-risk drivers are much more expensive than the premiums available to average drivers, and not every insurance provider may be willing to cover you.

Does a gap in coverage increase your premium?

If an insurance company cancels your policy for a negative reason, you may see an increase in your next insurance premium with a new company.

These reasons an insurer might cancel a policy can include:

Non-payment. If you fail to pay your premium, your insurance company can cancel your policy.

Licence suspension. When your driver's licence is suspended due to a driving conviction, for example, your insurance provider may cancel your policy. Similarly, if you're convicted of driving without insurance during the coverage lapse period, you could also face a higher insurance premium when you re-apply.

Fraud or failure to disclose information. This includes any misrepresentation of facts regarding your driving record or profile that leads to the insurance provider cancelling your policy. For example, listing a false postal code on your insurance application or profile to get a lower rate.

The severity of the increase will vary depending on the cause of the lapse, but it may also be determined by the length of time you have been without insurance.

Even when switching insurance providers, it's critical that your insurance doesn't lapse. In some provinces, if you exceed a certain number of months without insurance, you may be treated like a new driver when you reapply for a policy.

And some insurance providers consider having no previous auto insurance history or driving experience riskier than having a violation on your record – and they may charge you accordingly.

Does any gap in your insurance history impact your rate?

If you have a gap in your insurance history for an innocent reason, you may not be subject to a rate increase — especially if you live in Ontario.

Since November 1996, has prohibited insurance companies in the province from pricing based on a gap in coverage. This means providers in Ontario can’t use any lapses in coverage to determine a driver's premium for reasons other than non-payment and serious offences, such as licence suspension or fraud.

If you no longer need insurance because you no longer own a car, for instance, it will be noted on your policy. As long as you paid any applicable cancellation fees prior to ending your policy, this scenario may not affect your premium.

While the regulation allows insurance companies to consider some gaps in their risk classification system, not every gap may have the same impact on premiums. For example, a lapse caused by a person's inability to afford the policy should not result in a premium rise equal to that of a lapse caused by a person being convicted of driving without insurance.

That doesn't mean you can neglect to pay your bills. Even when switching insurance providers, you shouldn’t allow your insurance to lapse. It only takes a day without it to receive a fine or be on the hook for damages if you get into a collision without coverage. 

How to avoid a gap in your insurance coverage

The best way to avoid a gap in coverage is to keep your auto insurance policy up to date and consistently active. If that's not possible, the next best option is to have yourself added to another person's existing policy. 

For instance, if you’re a parent and your child is a student attending school in a different city, some carriers will allow you to add them to your policy while they're away. Being listed as a secondary driver still constitutes an active insurance history.

Or, if you’re simply not driving as much as before, you can also get usage-based insurance that tailors your insurance based on your driving habits or patterns. There are two types of UBI coverage you can opt for:

Pay-as-you-drive means your insurance premiums are directly linked to the distance you drive. The less you drive, the lower your premium. It’s ideal for infrequent drivers or those who primarily use public transportation.

Pay-as-you-go charges the driver based on the number of kilometres driven throughout the years. It tracks factors like speed, braking, and time of day.

If you still want to cancel your car insurance policy for any reason, make sure you contact your insurance broker or agent and ask them about how it will impact your insurance history and premium in the future.