Because it’s not always easy to understand insurance, and many of you are wondering whether or not it’s possible to cancel an insurance policy, we’ve decided to discuss this topic in this article!
Here is an interview with Joany Turmel-Bilodeau, property and casualty insurance broker at Assurances Multi-Risques. We asked him some questions on this topic, and here are detailed answers to all your questions about canceling an insurance policy!
Scenario: My home insurance policy expires in June 2021, but I have started a home daycare and my current insurer refuses to insure me. I therefore need to find a new insurer: will I have to pay a penalty?
Joany: In this context, an insurer cannot penalize someone because its underwriting standards no longer meet the insured’s needs. The insurer will therefore not impose a financial penalty on that person, but will simply cancel the contract on a pro rata basis.
However, if the insured party wishes to cancel the policy, for example because they feel that their premium is too high, or even if they simply sell their vehicle, cancellation fees will apply for any termination of the current contract.
Cancellation fees are calculated based on the premium and the number of days remaining before the end of the contract. For example, it would cost more for someone who has just taken out an insurance policy than for someone whose policy is due to expire in a month.
Are there situations in which it is more advantageous to pay the penalty and switch insurers?
In the case of a home insurance policy, you must ensure that the building is in perfect condition, because the new insurer will make a list of recommendations, and if you do not comply with these recommendations (e.g., replacing the roof), the risk becomes higher for an insurer and this greatly restricts the market. If you calculate everything from start to finish—the costs incurred to carry out the insurance recommendations, the fees, etc.—the bill will be much higher than the $200 you might have thought you would save on your annual premium.
However, if you decide to compare premiums yourself, you must ensure that the coverage you receive is exactly the same from one insurer to another. Otherwise, it is normal for there to be significant differences in the amount of the premiums.
The only situation in which it would be advantageous to terminate a contract and pay the penalty is if an insurer can no longer meet the insured’s needs. And even then, there are so many questions to ask yourself before making such a decision, because if it’s just a matter of premium amount, it’s better to wait until the end of your contract to change insurers. But sometimes, if you change vehicles in the middle of a contract and your current insurer doubles the premium, it may be more cost-effective to pay the penalty and change insurers. By working with an insurance broker, you always have an advantage because the broker will defend your interests with the insurer to prevent such a situation from occurring!
If someone really wants to switch insurers, when is the best time to do so?
Joany: Just before the contract expires. You have until the day itself to contact your insurer and inform them that you will not be renewing. The next day, the contract begins, so it’s too late, and cancellation fees would be charged.
People are often very busy and forget to call their insurer to cancel their policy. As a customer, it is important to take responsibility for your car and home insurance.
My best advice is to call your insurance broker at least once a year before your policy expires to update your file and make sure your coverage still meets your needs. Sometimes our circumstances change during the year, and we don’t always think about how that might affect our insurance. Like buying certain breeds of dog, for example!
Your broker can also check your premium and ensure that you still have the best coverage at the best price! Even though some people like stability and prefer to stay with the same insurer, it’s still important to update your file every year!