How to Switch Insurance Companies Without a Coverage Gap

People switch insurance companies for all kinds of reasons, whether that be a better price, superior customer service, or convenience. Whatever the reason may be, the key is to make the switch without leaving a gap in your coverage. 

A coverage gap, also known as a lapse in coverage, doesn’t just leave you unprotected – it can also impact the price you pay for home and car insurance in the future. 

In this blog, you’ll learn what a lapse in coverage is, why it’s so important to avoid one, and the exact steps to take to successfully switch insurance companies without a coverage gap. 

Key takeaways

To switch insurance companies without a lapse in coverage, line up your new policy to start the same day or the day after your old one ends and handle your cancellation carefully. 

Steps to follow:

1. Review your current policy’s cancellation terms 
2. Compare quotes to find the best price and coverage
3. Ask your broker for guidance, if needed 
4. Set your new policy to start the same day or the day after your old one ends
5. Cancel your old policy 
6. Coordinate first and final payments 
7. Send new proof of insurance to the required parties

What is a lapse in coverage?

A lapse in coverage happens when there’s a gap between the end of your old insurance policy and the start of your new one. Even if it’s just for a few days, that short break can leave you completely unprotected. This applies to both home and car insurance. 

For example, let’s say you cancel your car insurance policy on January 1, but your new policy doesn’t start until January 8. That means you’re driving without insurance, which is illegal in Canada. During that time, you could face hefty fees, license suspension, or even vehicle impoundment. 

In fact, according to Diamond & Diamond Lawyers, “In Ontario, penalties range from $5,000 for a first offence and escalate to a maximum of $50,000 for repeat offenders.” Plus, if you get into an accident during that time, you’d be fully responsible for any damages, injuries, and liability costs. 

The same idea applies to home insurance. While it’s not legally mandatory like car insurance, your mortgage lender, landlord, or condo board may require it. If your home insurance coverage lapses, you may violate the terms of your loan or lease agreement or jeopardize the closing of a new home. You might also face financial penalties.   

What’s wrong with a gap between insurance policies?

The major concern with coverage gaps, even short ones, is that they put you at financial risk and can appear on your insurance record, potentially marking you as a higher-risk client and increasing your premiums.

Coverage gaps leave you financially vulnerable

Anything that may happen during a gap in insurance coverage (ex. a car accident, burst pipe, or break-in) becomes your responsibility. 

For example, let’s say a fire breaks out in your home the week your policy has expired. Normally, your home insurance could cover the cost of repairs and replacements. But without an active policy, you’d have to pay out of pocket, which could easily run you tens of thousands of dollars – money you might not have. 

Coverage gaps raise red flags with insurers

Insurance companies look at your coverage history when calculating your premium. A lapse in coverage (even for a single day) can signal instability or financial irresponsibility.

As a result, people with gaps in coverage tend to receive higher quotes and pay more for insurance than someone with a continuous coverage history. Moreover, a long lapse in coverage (ex. 30+ days)  could even make you ineligible for coverage from some insurers. 

As Channelle Cote, an AMF- and RIBO-licensed broker at YouSet, explains, “Whether it was unintentional or not, a lapse in coverage is something I see affect insurance prices all the time. It’s one of the benefits of working with an insurance broker, actually — we can advise you on how to go about cancelling policies and switching providers so you avoid the negative impacts of a lapse in coverage.”

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Instructions: How to switch insurance companies without a coverage gap

Switching insurance providers isn’t stressful if you do it right. To make sure you’re never left uninsured or with a coverage gap, follow these step-by-step instructions:

• Check your current policy’s conditions for cancellation or non-renewal
• Shop around and compare quotes 
• Ask your broker for guidance, if needed 
• Buy a new policy and have it start the day of or after your old policy ends
• Cancel your old policy once your new one is finalized 
• Coordinate first and final payments
• Send new proof of insurance to the required parties

Step 1: Check the conditions for cancellation or non-renewal in your current policy

Before you make the switch, take a look at your current insurance documents. Review any cancellation fees, penalties, or notice periods that might apply, and see if your policy automatically renews. If it does, find out how to stop the renewal so you can make a clean switch. 

Step 2: Confirm you’re getting the best price

Take some time to compare prices and options from multiple insurers, so you get a full picture of what’s available to you. Make sure that the deductibles, coverage limits, and optional add-ons are the same for each quote so that you’re comparing fairly. 

With YouSet, you can easily compare multiple quotes side by side, customize your coverage, and buy your new policy online within minutes. 

Step 3: Ask your broker for guidance, if needed

If you’re unsure about the process, reach out to your broker for help. When you work with a broker like YouSet, you’ll get access to licensed insurance experts who can walk you through each step and even help you coordinate your cancellation and start dates to avoid coverage gaps. 

Step 4: Buy your new policy and have it start the day of or after your old policy ends

Once you’ve chosen the provider and policy you want, pay attention to your policy dates. Make sure your new policy meets any requirements from your financing or leasing company, mortgage lender, landlord, or condo association. When prompted to select a start date, choose the same day your old policy ends or the day immediately after. 

Step 5: Cancel your old policy once your new one is finalized

Only cancel your old policy after your new one is confirmed and in effect. Follow the instructions outlined in your policy documents, write your cancellation letter (if required), and clearly state the date you want the policy to end. Keep a copy of your cancellation request and confirmation as proof that everything was processed correctly. 

Step 6: Coordinate first and final payments

Make sure your payments are in order during the transition. Pay the remaining balance on your old policy, if needed, and confirm that you have sufficient funds for the first payment of your new policy in the correct account. This helps prevent accidental cancellations caused by timing or account errors. 

Step 7: Send new proof of insurance to required parties

Once your new policy is active, you’ll want to share the new proof of insurance. Send it to your financing or leasing company, mortgage lender, landlord, or condo association, as needed.