How A Missed Car or Home Insurance Payment May Affect You
Many Canadian consumers may find themselves in a cash crunch because of the coronavirus pandemic and our country’s lockdown to contain the virus. As the economy sinks and the unemployment rate rises, many face the unenviable task of choosing which bills they can afford to pay and those they must skip, including making their monthly auto insurance and home insurance payments.
Normally, missing insurance payments carry consequences that can lead to your car insurance or home insurance policies being cancelled. However, in today’s uncertain times Canadians may have options available to them they normally wouldn’t because the havoc the COVID-19 lockdown is having on families across the country is serious. Even with the federal government’s introduction of the Canada Emergency Response Benefit, a recent Leger survey gauging how people feel about the economic impacts of COVID-19 finds 65% of Canadians believe the worst is yet to come. That survey also finds 45% have seen their incomes decrease. Another 22% worry they will have difficulty paying their mortgage or rent.
What If I Can’t Make a Home Insurance Payment Because of COVID-19?
Although you are not legally required to have home insurance in either Ontario or Alberta, most mortgage lenders require homebuyers to have insurance to protect their properties and homes or condominiums.
If you have concerns you cannot make your monthly home insurance payment because of the coronavirus pandemic and subsequent lockdown, do not hesitate to contact your insurer or broker before you miss a payment to explain the situation you face.
Some home, condo, and tenant insurance providers are allowing their customers to defer payments and are also deferring policy cancellations due to non-payment.
Missing multiple home or condo insurance payments also carries the possibility of your policy being terminated. Should that happen, getting a new home insurance policy will be tricky. Insurers may not extend coverage to you. If they do, it’s possible your premium may be higher, particularly if you are labelled high risk.
What If I Can’t Make a Car Insurance Payment Because of COVID-19?
If you think you may need to miss making a monthly payment on your auto insurance policy, your first step should be to contact your insurance company or broker as soon as possible. Doing nothing and hoping for the best will only make matters worse.
You may find it encouraging to know some insurers will allow their customers who are experiencing financial difficulties to miss a payment. In some cases, they will spread the missed payment out over the rest of the year, and they’ll waive any non-sufficient funds (NSF) fees related to the missed payment.
When contacting your insurance provider or broker, ask about other things you can do to help save money on your auto policy. That may include temporarily suspending your coverage on a vehicle you’re not using. But if you choose to suspend your coverage, know that you cannot drive that vehicle under any circumstances. It is illegal to drive a car without insurance in Canada.
If you miss a payment, your insurance company will notify you and will outline what actions they intend to take. It’s best to avoid that scenario by getting in touch with them first.
If, however, you have a history of non-payments, your car insurance policy may be cancelled. Also, if you have an outstanding balance owed to the insurer that you do not pay, the insurance company may send it to a collection agency. If that happens, your credit score will take a hit, which may make getting auto insurance in the future a real challenge. Furthermore, you may be classified as a high-risk driver, which compromises your chances of getting a low auto rate.
What to Do If You Need to Miss a Premium Payment on Your Home or Auto Insurance
- Contact Your Insurance Company or Broker. Make this priority No. 1 if you think you can’t make a payment on time and inquire about arranging different payment options.
- Get in Touch with Your Bank. You may want to ask your financial institution about adding overdraft protection to your account. Overdraft protection prevents a cheque or electronic transfer from bouncing helping you avoid getting dinged with an NSF fee.
- Set Reminders on Your Mobile Device Calendar. Most if not all of us have a smartphone or mobile device we use daily. Try setting payment reminders on your device’s calendar app to remind you of any upcoming payment deadlines.
- Create an Emergency Fund. If you are able, sock away a bit of money each month in a separate saving account from the one you typically use. Building an emergency fund will help you keep up with your scheduled insurance payments.