The important points
- Car insurance premiums can be paid monthly or annually. There is a finance fee for monthly payments.
- Premiums are paid a full month in advance of the coverage date; accordingly, the first two months’ premium are due right away.
- If the policyholder cancels a policy, there will be a partial refund. The amount depends on whether the policy was already in effect and how much of the coverage term had elapsed.
Monthly vs. annual car insurance payments
Car insurance policies from Square One have a term of one year. When you purchase your policy, you can choose between paying for the full year or splitting the payment into monthly installments.
Sales tax and finance fees
In Ontario, car insurance premiums are non-taxable. Whether you choose annual or monthly payments, you won’t pay HST. In Quebec, there is a 9% tax on insurance premiums.
In Ontario, a 1.3% finance fee will be added to your monthly installments if you choose monthly payments. In Quebec, there is a 3% finance fee. There is no finance fee for annual payments in either province — the total you pay is simply equal to your premium.
Payment timing
If you choose annual payments, you’ll pay the entire year’s premium immediately upon purchase. Even if you want your policy to start later (you can choose a start date up to 30 days in advance), the payment will still occur right away.
If you choose monthly payments, your yearly premium will be split into 11 installments. Why 11?
The payment timing for monthly payments is a little different than you may expect. Monthly payments are charged one month in advance of the effective coverage period. For example, your coverage for March 1 – 31 would be paid on February 1. For this reason, if you choose monthly payments, your initial payment will be two months’ premium. Regular payments will commence the month after.
For example, if you buy a policy on January 1, your payment schedule would look like this:
|
Payment
|
Payment date
|
Coverage period
|
|
1
|
January 1
|
January 1 –
February 28
|
|
2
|
February 1
|
March 1 – 31
|
|
3
|
March 1
|
April 1 – 30
|
|
4
|
April 1
|
May 1 – 31
|
|
5
|
May 1
|
June 1 – 30
|
|
6
|
June 1
|
July 1 – 31
|
|
7
|
July 1
|
August 1 – 31
|
|
8
|
August 1
|
September 1 – 30
|
|
9
|
September 1
|
October 1 – 31
|
|
10
|
October 1
|
November 1 – 30
|
|
11
|
November 1
|
December 1 – 31
|
The initial payment will be about twice as much as subsequent payments, as it’s covering two months. Your payments will always take place on the same day each month. For example, if your policy starts on the 15th, that would be your payment day each month. The coverage periods would run from the 15th of one month until the 15th of the next.
Payment methods
Whether you choose monthly or annual payments, Square One accepts the following payment methods for car insurance policies:
- Visa, Mastercard, or American Express
- Visa Debit or Mastercard Debit
- Bank withdrawal
We don’t accept prepaid credit cards, wire transfers, or e-transfers.
Missed payments
It’s important that you keep your payment method up to date.
If your credit card expires or your bank account has insufficient funds at withdrawal time, your policy could be cancelled for non-payment. In either case, we’ll email you a notice with an outline of the steps you’ll need to take next.
If a customer is paying by credit card, we’ll send a notice and re-attempt the payment if possible. If we don’t receive a valid payment before the noted deadline, the non-payment cancellation process will proceed. If paying by bank withdrawal, the non-payment cancellation process will proceed directly after a failed payment.
If your policy is cancelled for non-payment, you may be able to have the policy reactivated if you provide a valid payment method by a certain time. Reactivation depends on several factors, particularly whether there have been previous missed payments.
If you receive a non-payment notice, it will explain how to proceed.
Cancellation and refunded payments
If you cancel your policy during the policy term, you’ll receive a partial refund. The refund amount depends on when you cancel.
- If you cancel before the policy goes into effect, you’ll receive a full refund minus a $50 Minimum Retained Premium.
- If you cancel after the policy has gone into effect, the refund will be calculated on a short-rate basis. That means you’ll receive a refund of all the unearned premiums minus a penalty. The penalty becomes less as more policy term expires.
For more about cancellation and refunds, visit our cancelling a car insurance policy page. The page describes several reasons someone might want to cancel their policy, and how we can assist in any case.
Want to learn more? Visit our Car insurance resource centre for dozens of helpful articles. Or, get an online car insurance quote in under 5 minutes and find out how affordable personalized coverage can be.
About the expert: Daniel Mirkovic
A co-founder of Square One with 25 years of experience in the insurance industry, Daniel was previously vice president of the insurance and travel divisions at the British Columbia Automobile Association. Daniel has a bachelor of commerce and a Master of Business Administration (MBA) from the Sauder School of Business at the University of British Columbia. He holds a Canadian Accredited Insurance Broker (CAIB) designation and a general insurance license level 3 in BC, Alberta, Saskatchewan, Manitoba and Ontario.
