If you ride a motorcycle in Canada, you are charged most of your annual premium for the summer months. That means if you pay monthly and try to cancel after the summer is over, you won’t get a refund. In fact, you’ll probably still owe money. This applies no matter who your insurance company is. It may sound unfair, but it’s just the nature of Canada’s short riding season.
Fall is a fun time for many motorcycle riders, but it’s also when many start to think about putting their bikes away for the winter. There is a natural instinct to want to save money when riders don’t get to ride, so every year, we get a lot of calls from customers wanting to cancel their motorcycle insurance policies. The idea is always to save on premiums during the winter months, then start a new policy in the spring.
Here is the truth: You almost never save money by cancelling your motorcycle insurance for the winter.
The technical reason is that, in insurance speak, motorcycles are “rated seasonally.” What that means in English is that even though your annual premium might be split into 12 equal payments for convenience, the insurance company charges you the full annual amount between March and October.
To be exact, here’s a breakdown of how they charge your motorcycle premiums:
| Month | Percentage of annual premium charged |
|---|---|
| January | 0% |
| February | 0% |
| March | 5% |
| April | 10% |
| May | 10% |
| June | 20% |
| July | 20% |
| August | 20% |
| September | 10% |
| October | 5% |
| November | 0% |
| December | 0% |
So, if you cancel your policy after the riding season, when you might have only paid half your annual premium (six monthly installments) or a little more, you will still owe money, even if your bike is parked.
With motorcycle insurance, instead of thinking about the annual premium, it’s better to ask, “How much will it cost me to ride each month”?
Say your policy started in March of this year, and your annual premium is $2,400. Your monthly payments should be $200 a month. If you keep your policy active until it renews, that’s all you need to know. However, if you do want to cancel at some point, the math gets trickier.
| Month | Percentage of annual premium charged | Real monthly cost to ride | Monthly premium paid | Total premium paid to date | Refund due | Amount owing |
|---|---|---|---|---|---|---|
| Mar | 5 | $120 | $200 | $200 | $80 | — |
| Apr | 10 | $240 | $200 | $400 | $40 | — |
| May | 10 | $240 | $200 | $600 | — | — |
| Jun | 20 | $480 | $200 | $800 | — | $280 |
| Jul | 20 | $480 | $200 | $1,000 | — | $560 |
| Aug | 20 | $480 | $200 | $1,200 | — | $840 |
| Sep | 10 | $240 | $200 | $1,400 | — | $880 |
| Oct | 5 | $120 | $200 | $1,600 | — | $800 |
| Nov | 0 | Free | $200 | $1,800 | — | $600 |
| Dec | 0 | Free | $200 | $2,000 | — | $400 |
| Jan | 0 | Free | $200 | $2,200 | — | $200 |
| Feb | 0 | Free | $200 | $2,400 | — | — |
As you can see, once October arrives, you’ve only paid $1,600 (8 of 12 monthly installments), but the entire $2,400 annual premium has already been charged to you. (In insurance, we would say the entire premium has been “earned”). The result is that you still owe $800. Even if you were to remove all coverage except fire and theft, it doesn’t matter. The full annual premium is still owed as it has been “used up” during the summer months.
If you cancel the policy, you will get a large bill for the remaining premium, due immediately. If you keep the policy in force, on the other hand, you can pay the amount owing over the remaining months (Nov-Feb). And hey, if there are some nice fall days, you might even get to ride a few more times before the snow comes, knowing that you and your bike are still covered.
Not to mention that if you cancel your policy in October, your bike is not protected from fire and theft during the winter months.
Why is this all so confusing?
You’re not the first to think that there should be a better way to structure payments so that motorcycle insurance is easier to understand.
The confusion comes from a combination of Canada’s short riding season, and consumers’ preference for regular monthly payments.
If insurance companies just billed you every month for the premium due that month, then you could cancel at any time, and you’d be paid up.
On the other hand, if insurance companies just spread the annual premiums evenly over 12 months, then everyone (even me, frankly) would cancel after six or eight months, there wouldn’t be enough premiums to cover the cost of claims, and rates would increase dramatically.
There really is no easy answer. The current system works well for riders who keep their policy in place year-round, but it will likely continue to be frustrating for anyone who tries to cancel after the riding season is over.
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