How Gaps In Coverage Affect Auto Insurance Rates

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A gap in your insurance coverage could be for a variety of reasons. If you are in such a situation then it is good to know your options and make an informed decision. Whether it was intentional or not, when you have no insurance it could have many outcomes. If you are caught without insurance then it could invite heavy penalties and conviction. Sometimes there are financial reasons that cause a gap in your auto insurance.

You may ensure that your current insurer has proof of your previous insurance to consider your continuous coverage. For this, you may get a letter from your insurance broker with all relevant details of your prior coverage. This will serve as a proof of your insurance history coverage level, insurance dates etc.The reason behind a gap in your insurance coverage will determine how your insurer may calculate your rates.

Regulations About Lapse In Auto Insurance

Since November 1996, the autoregulation in Ontario prohibits insurance pricing based on a gap in insurance except in certain situations. These may allow insurance companies to consider a gap in coverage as a factor in pricing. Another reason for insurers to consider coverage lapse while calculating premiums is a contravention of Section 2 of Automobile Insurance Act by the insured.

The specific circumstances as per Ontario Regulation 664 are as follows:

  • The policyholder got a conviction for driving without insurance during the coverage lapse period.
  • If the gap in coverage was due to policy cancellation by the insurance company due to payment default.
  • When a driving conviction suspends the policyholder’s driver license due to which there is a gap in coverage.
  • Any misrepresentation of facts by the policyholder related to their driving record for rate evasion that causes the insurer to cancel the policy.

Insurance companies may not base pricing on gaps in coverage for reasons other than those in the autoregulation. As an example, when the policyholder cannot afford to pay the car insurance premiums and the insurer cancels the policy, this may not increase rates much. However, if a driving conviction leads to policy termination then that lapse may cause a substantial increase in rates. So, insurance companies have to strictly adhere to the regulation while determining the severity of the reason for categorizing risks and premiums.

Will Gap In Auto Insurance Affect You?

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There are factors other than gaps in coverage that could affect your premiums and may depend on how your insurer calculates your rates. Some insurance companies may not give much weight to gaps in coverage if all other factors are favorable; you may still get a fair rate. If the driving profile is bad and there were convictions or violations on your record then this could affect your rates. When you also have a gap in coverage that could surely add to the problem and hike your rates up. When the insurability risk of a policyholder increases then insurance companies would consider pricing high, whether there is a gap or not in coverage.

If you are honest and inform the insurance company about the reason for coverage gap then it would be better. As per regulation if payment default led to insurance lapse then your insurer may consider your application if you now assure them of timely payments.

How Do Insurance Companies Look At Gaps In Coverage?

When any careless act could cause your insurance company to cancel coverage, your current insurer may consider you high-risk. If you attempt to drive without insurance then that means that you are a high-risk offender that invites troubles. In case you could not afford your car insurance premiums, your insurer may cancel the policy. This could also mean that you may have no funds for vehicle maintenance. However, if you may just forget to pay your insurance bills or was traveling abroad then too bad. You could set an auto debit authorization so that such an error does not happen and your coverage continues.

But if you are going through serious financial concerns then you must inform your insurer.  This could be an illness, disability, work layoff or any other reasons. If you wish to avoid a gap in coverage then it is best to communicate to your insurer at the first possibility of a payment default. Maybe, when you speak to your insurance company they could help you with a payment arrangement or alternatives. This way you may continue coverage and do not have to shop around when you have a gap in coverage. Keeping your car insurance current and active is very important to get a good rate and help you to keep your costs down.

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