In Quebec, you can cancel your car insurance policy anytime. But if you do it before the renewal date, your insurer will keep the portion of the premium you’ve already used. They’ll also add a penalty based on a special “short-rate” cancellation table. This penalty can actually be higher than a simple pro-rata calculation.

For instance, imagine you pay $1200 a year and decide to cancel after 6 months. You might expect to just pay $600. But with the short-rate penalty, your insurer could keep around $700, leaving you with only $500 back.

👉 Outcome: Cancelling costs you $100 more than a basic pro-rata calculation would have ($600).

In this article, we’ll guide you through the cancellation process to help you make the best decision for your car insurance policy.

Reasons for cancelling your car insurance policy

Here are the main reasons why you might cancel your car insurance policy in Quebec:

• Sale or replacement of a vehicle: If you sell your car, trade it in, or get a new one, you can cancel the policy linked to your old vehicle. If you cancel retroactively, you’ll need to show proof of this to your insurer.
• Change in financial or personal situation: Moving (especially to another province), changing jobs, or significantly reducing your annual mileage are all good reasons to review or cancel the policy.
• Looking for a better value: If you find a more attractive offer elsewhere (better premium, coverage, or services), you can cancel your current policy and switch to another insurer.
• No longer needing insurance: If you stop driving completely (e.g.: your license is suspended, your vehicle is taken off the road, exported, or scrapped), you can cancel your policy.
• Insurer-related reasons: If you’re not happy with your experience with your current insurer, you can cancel your policy and get insurance elsewhere.

What are the penalties for cancelling a car insurance policy?

Here are the main penalties linked to cancelling a car insurance policy in Quebec:

• Pro-rata charges: If you cancel on the expiry or renewal date, the pro rata rule generally applies.
• Short-rate cancellation: If you cancel on the expiry or renewal date, there is generally no penalty. During the insurance term, the short-rate cancellation table applies.
• Administrative fees: Some insurers add fixed fees (often between $25 and $50) to cover the costs of processing your cancellation.
• Impact on insurance history: Frequent or poorly managed cancellations can make things tougher for you in the future. Insurers look at how stable your policies are when calculating your premiums.

Don’t forget that, in Quebec, it’s mandatory to have insurance to drive. Make sure you have a new policy in place before cancelling your old one. Also, your insurer can also cancel your policy in certain situations, like frequent accidents or repeated late payments. However, they must send you a cancellation notice within the prescribed timeframe.

How to manage car insurance cancellation fees

Figure out your cancellation penalty

To calculate your car insurance cancellation penalty, consider using our car insurance cancellation calculator. But if you want to do it manually, here’s how:

• Start with your annual premium
  e.g.: $1200 per year
• Find out how long you used the policy
  e.g.: you had the policy for 6 months, which is 50% of the year
• Check the short-rate cancellation table.
  • All insurers use a standard policy form, called QPF1, enforced by the AMF (Autorité des marchés financiers).
  • For example, if you’ve had your policy for 50% of the insurance term, the table might show a short-rate cancellation percentage of 55% to 60% of the premium (not just 50%).
• Do the math:
  • Premium owed based on the short-rate table = $1200 × 55% = $660.
  • You’ve already paid $1,200, so your refund = $540.
  • Your actual penalty (the extra cost) = $60, compared to a simple pro-rata calculation (where you would have only paid $600).

How to cancel your policy without penalties

Here are three ways to limit or avoid the penalties for cancelling your car insurance policy in Quebec:

• Wait for your policy’s annual renewal date: Cancelling your policy on its renewal date can reduce or even eliminate penalties, though some fine print might still apply depending on the cancellation table attached to your policy.
• Sale or loss of vehicle: You can ask your car insurance provider to cancel your policy. The refund for the unused portion of your premium depends on your policy’s terms. You’ll need to provide written proof (e.g.: bill of sale, transfer of ownership) to support your request.
• Request an endorsement or transfer: You can transfer your coverage to a new vehicle. This avoids cancelling your insurance midterm and the fees that come with it. It’s like your old policy gets a fresh start with your new ride!

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Frequently asked questions about car insurance cancellation and penalties

What are the deadlines to cancel a policy without fees?

To avoid cancellation fees, it’s key to respect these timelines:

• On your expiry or renewal date: you can cancel your policy without a penalty.
• Outside this term: cancelling before your insurance term ends can lead to fees, usually calculated using the short-rate rule.

Knowing this will help you avoid surprises and keep costs down.

Can you transfer your policy when you change vehicles?

In Quebec, you can usually keep the same insurance policy when you get a new vehicle. However, your insurer might cancel the policy if the new vehicle poses a higher risk. To avoid extra costs, tell your insurance company about your new car’s information right away. Being transparent helps you keep your coverage without interruptions or penalties.

Why do some insurers refuse coverage after a cancellation?

Insurers can refuse new coverage for several reasons, including a history of irregular payments. This kind of situation can negatively impact your credit file. We remind you of the importance of getting new insurance before cancelling your old one, because driving without coverage is illegal in Quebec.