Six reasons your auto insurance policy could be cancelled

By: Lisa Coxon on May 22, 2025

This article has been updated from a previous version.

An insurance company may cancel your policy for various reasons, including non-payment of premiums, changes in risk factors, misrepresentation, or discontinuation of coverage in your area, just to name a few. And if that happens, not only will it reflect poorly on your record — it could result in a higher premium with the next provider.

For example, the difference in monthly premiums for a 35-year-old male driver in Toronto, Ont. who’s never had a policy cancelled versus having a policy cancelled due to non-payment saw an increase of $163 a month (or $1,958 a year) on the lowest rate available.

Now, depending on whether or not you live in a province that issues private auto insurance, like Ontario, versus public insurance, like British Columbia and Saskatchewan, the reasons for cancellation could vary slightly. For instance, there may be more inspections and certifications to comply within the public auto insurance sphere than in the private sphere, such as vehicle inspections.

“Although we have the authority to cancel an owner’s certificate, it is extremely rare,” says Lindsay Wilkins, media relations advisor at the Insurance Corporation of British Columbia (ICBC). “Customers almost always initiate a cancellation.”

But company-initiated cancellations do happen. And here are some reasons why:

1. Not paying your monthly premium

When you purchase an auto insurance policy, you need to make either monthly or annual payments. The easiest way to have your policy cancelled is by not paying for it. If you don’t want to renew your policy, don’t just stop paying. That may put you in a higher risk category, which would likely result in an increase in your premium.

Say, for instance, you pay for your monthly premium using automatic credit card payments. If your payment bounces, your insurance company may have to pay a non-sufficient funds fee (NSF) — and they’re not going to like that. So, if you anticipate difficulty making your payments, contact your insurance provider right away to let them know. They may be accommodating and find a solution that works for both of you.

According to Wilkins, ICBC generally won’t cancel a policy if a customer defaults on a payment, but it could seize your licence plate.

2. Misrepresenting your vehicle, failing to update information, and making fraudulent claims

Your auto insurance provider can cancel your policy if you fail to inform them of any updates to your personal information by a given deadline, even if you miss it by only a day.

According to the Financial Services Regulatory Authority of Ontario (FSRA), “an insurance company has the right to cancel your policy if the information you have given is not correct or complete. Non-disclosure or misrepresentation on your part of any of these facts could cause your rates to go up. Furthermore, it could render your policy null and void, and leave you without protection in the event of a claim.”

Meanwhile, Saskatchewan Government Insurance (SGI) spokesperson Tyler McMurchy explains that in provinces with public insurance systems, such as Saskatchewan, failing to answer SGI’s annual Registration Eligibility Declaration (RED) questions—or failing to maintain required cargo or liability insurance—can also result in policy cancellation.

In British Columbia, drivers who commit fraud, drive without a valid licence, or are convicted of certain criminal offences may not be eligible for the province’s Basic Vehicle Damage Coverage (BVDC). This coverage, which is part of ICBC’s Enhanced Care model, typically covers up to $200,000 in vehicle repair costs when another driver is responsible for a crash.

3. The risk of insuring you and/or the vehicle has changed

The world of auto insurance — or any insurance, really — is all about risk. It’s how your premiums are determined and it’s something insurance companies will closely monitor while you’re insured with them.

So, if you’ve become a higher risk since you first signed on with your insurance provider, they have the right to cancel your policy if the risk of insuring you and your vehicle has changed significantly.

This could happen if, say, you’ve accumulated a lot of traffic tickets or made several expensive or at-fault claims during your time with the insurance company. When you’re a high-risk driver, you may be turned down by most companies and have to get facility insurance for high-risk drivers, where premiums can cost, on average, between $8,000 and $10,000 a year.

“We do not cancel a certificate when there are ‘too many claims,’ says Wilkins, of ICBC’s policy. “However, we may restrict what coverage the owner can purchase, for example, limiting the deductible or the coverage that is available.”

That’s why it’s important to be upfront and honest about any changes—like if you move—since some cities and neighbourhoods are considered riskier than others based on factors like theft rates and the number of past insurance claims.

4. You have no “financial interest” in the insured vehicle

Before you insure a vehicle, it’s important to understand the concept of financial interest—a foundational principle in insurance law.

“Insurance is based on the legal concept of ‘financial interest,’” explains McMurchy.

“Other than life insurance, one cannot insure something that they do not own. When a vehicle is registered to someone that does not have a financial interest in the vehicle, the vehicle is improperly registered,” she continues.

In other words, if you wouldn’t suffer a financial loss if the insured car were damaged, your policy could be cancelled. McMurchy offers this example: suppose a child is financially dependent on their parents—say the parent is named on the car loan and pays for the vehicle’s maintenance. In that case, SGI would consider the parent to have a financial interest in the vehicle, even if it’s technically “owned” by the child.

“This does not extend to [the parent] simply paying the insurance premium,” McMurchy clarifies.

“But in cases where a child is financially independent, living on their own, and carries the loan in their own name (if there is one), the parent does not have a financial interest in the vehicle. So, it would be improper for the adult child to register the vehicle in a parent's name.”

5. Failing to comply with required inspections, safety certificates, or orders

This one’s particularly important in provinces with public auto insurance, like British Columbia and Saskatchewan.

In Saskatchewan, for instance, drivers must undergo a first-time registration inspection, a safety order, a safety inspection, a total loss vehicle inspection, and obtain a certificate of safety fitness.

If they fail to comply with any of these, or their certificate of safety fitness is rated unsatisfactory, that could be grounds for SGI to cancel the policy.

6. The company stops servicing a region or shuts down

If your auto insurance company stops operating in a particular region or stops operating altogether, it can cancel your policy.

While this cancellation will still require you to find another auto insurance company to provide you with coverage, the good news is it won’t count as a stain on your insurance record, since it had nothing to do with poor consumer conduct and was completely out of your hands.

Having an open line of communication with your auto insurance provider can help you avoid a policy cancellation and the rate hike that can come with it.