Almost two-thirds (64%) of Canadian motorists allow their car insurance policies to automatically renew – a move that could be costing them hundreds of dollars annually, according to a recent survey conducted by Ratehub.ca.
“Over time, that’s thousands you could be spending on debt repayments, reducing the principal on your mortgage, or investing in the market,” the online comparison platform noted in its analysis of the poll results.
Ratehub.ca surveyed 1,300 drivers across the country and found that an overwhelming majority (84%) have been with their insurance company for at least two years. Of these, 16% have been staying with their providers for two to three years, a tenth has remained loyal for four to five years, while 58% have been with their insurer for more than five years.
A person’s age played a huge part in customer loyalty, with 77% of those who have been with the same insurer for at least four years aged 35 or older.
When it came to reviewing their policies, more than a third (69%) of respondents said they do so every year compared to 26% who do not. However, 51% admitted that they do not like shopping around for and comparing car insurance policies because they find the process time-consuming and felt that even if they did, “they won’t get a better deal” anyway. Only 35% said they compare premiums annually.
The survey also found that 65% of Canadian drivers were “happy” with their current rates, while 31% were not. More than three-fourths of respondents said they were confident that they have the right coverage in place. However, 14% did not feel they have adequate protection while 9% did not have an idea if their insurance was sufficient.
What happens when a car insurance policy is auto-renewed?
An insurance company typically sends the policyholder a notice about 30 to 60 days before their policy is up for renewal. They can renew their policies 30 to 45 days before this date. If the policy is taken out through a broker, they will be the ones sending the renewal notice. If the policyholder does not reply, the car insurance policy is automatically renewed.
Once renewed, the driver will be required to continue paying premiums. However, if they fail to review their policies beforehand, they will not have an idea if they are still getting the right coverage or the best rates.
Why drivers shouldn’t allow their car insurance policies to auto-renew
Among the primary reasons why many Canadian drivers allow their car insurance policies to renew automatically, according to Ratehub.ca’s survey, is that they find the process of shopping around and applying for a new one arduous and time-consuming.
But while auto-renewal may seem like the easiest option, many consumer finance specialists say this option is not always the most cost-efficient. Here are some of the drawbacks of this quite popular practice, according to experts.
1. It could cost you money.
Ratehub.ca estimates that a person could lose at least a few hundred dollars for failing to shop around for a new policy. This might not cost much in the short-term, but in the long run could reach thousands of dollars, especially with car insurance premiums across the country steadily rising as pandemic restrictions ease.
Read more: Auto insurers at coronavirus crossroads
To save on premiums, the personal finance website advises policyholders to take advantage of online comparison platforms.
“Set a reminder on your phone to check auto insurance quotes online every year,” the firm suggested. “If it renews within 60 days, compare quotes now. Remember, five minutes could mean big savings, and if not, at least you know you’re getting the best rate.”
2. You may no longer have the coverage that you need.
Some protections in an insurance policy may have an expiration date that may not be automatically carried upon renewal or may get more expensive after a certain number of years. Because of this, the comparison website Lowestrates.ca stressed the importance of being aware of what exactly the inclusions are in a car insurance policy at any given time.
“A renewal gives you the opportunity to take a fresh look at your policy and see how, exactly, it’s still serving you,” the company wrote on its website. “You may even decide to go with a different provider altogether. If you do, a renewal is the most opportune time to do so, as some companies will charge you penalties for cancelling at any other period during your term.”
3. Your circumstances may have changed.
Renewals are also a good time for policyholders to advise their insurance providers of any changes to their personal information, which could impact their premiums. This may include their place of residence, occupation, and driving patterns.
“If you started working from home in 2020, you possibly contacted your insurer to let them know of the change in your driving habits,” automotive news outlet Driving.ca wrote on its website. “That could have triggered a one-time refund, or a drop in your rate. If you’ve recommenced commuting, you need to report that.”
4. Rates can change frequently.
According to Ratehub.ca, auto insurance companies change rates every quarter, “potentially for reasons that have nothing to do with your driving, and all to do with their risk tolerance.” This makes renewal time a great chance to compare insurance rates and for drivers to ensure they are getting the best price for their needs.
Lowestrates.ca, however, reminded policyholders that “renewal is not do or die,” adding that they can always makes changes in their auto insurance policies later on.
“But regularly comparing the market and staying on top of industry trends so you know you’re getting the best deal on car insurance is always smart – especially if you like saving money,” the firm noted.