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Everything you need to know about car insurance in Canada

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You are looking to buy a new car insurance? Here's everything you need to know about car insurance in Canada.

According to law, every Canadian in every province and territory who owns a vehicle must have car insurance to operate their vehicle. Your license can get suspended if you’re caught driving without insurance, with the possibility of getting your car confiscated and paying a considerable fine.

If we look at Ontario as an example, it’s illegal to drive an uninsured car, and you can face penalties of between $5,000 and $25,000 if it’s your first conviction and between $10,000 and $25,000 if it’s your second or subsequent conviction.

Along with these penalties, you will also face an increase in your insurance premiums, which can be costly over the long term.

Because car insurance is so important for Canadians, you need to understand what mandatory insurance is required and what to do in the event you need to claim. Read further to learn everything you need to know about car insurance in Canada.

How Does Car Insurance Work in Canada?

Car insurance is similar to home insurance, but you are getting coverage for your car instead of your policy providing coverage for your home. The premiums you pay get based on the insurance company’s expected annual cost of covering your car. In exchange for taking on the risk of your vehicle, you’ll pay your auto insurance provider payments on a monthly or annual basis.

Your insurance company then collects all of the premiums from the drivers it insures and puts them into a single huge pool. The insurance company uses the pool of premiums to cover the losses of the drivers who file claims during the year.

The losses you are covered for will be stated in your contract with the insurance company. Before you sign up for coverage, make sure you read your contract thoroughly to ensure you understand the scope of your coverage. Car insurance policies aren’t always the easiest to comprehend, so chat with your insurance representative if you have any questions regarding your coverage.

The Different Types of Car Insurance in Canada

The minimum level of car insurance required in Canada differs by province or territory, so it’s crucial to get acquainted with the rules in your area to ensure you comply.

1. Third-Party Liability Coverage

Third-party liability coverage is the most basic car insurance type in Canada and is mandatory. As a policyholder, it protects you against having to pay any damages to someone’s property. You will also have cover if someone is injured or killed due to an accident where you are at fault.

The required minimum coverage varies by province, but it should cover the medical expenses of everyone injured in an accident at the very least.

2. Collision Coverage

Collision coverage protects you not just from third-party liability but also from hitting something other than a car, such as a guardrail or an embankment. It’s standard for this coverage to cover you if you’re in an accident with a driver who isn’t covered by insurance. This higher level of protection usually comes at a higher price than liability coverage.

3. Comprehensive Coverage

Comprehensive coverage provides the broadest protection between the three coverages and is usually more expensive amongst them. It primarily covers medical and collision-related damages, although it may also cover theft and flooding.

4. Accident Benefits

When you’re in a car accident, your accident benefits pay for your medical bills and income loss, or if you die in the accident.

Ontario, for example, includes benefits such as attendant care, long-term disability, medical rehabilitation, funerals, etc.

In Quebec, you are immediately registered in bodily injury insurance. Premiums are paid when you register your driver’s license. There is no need to get additional coverage for this.

Optional Coverage

You might want to consider adding two optional coverages to your car insurance: specified perils and all perils.

  • Specified perils: Gives protection against specific vehicle damage such as theft or attempted theft, as well as weather-related damage such as lightning, fire, earthquakes, and windstorms.
  • All perils: Combines collision and comprehensive coverage into one policy.

Endorsements

Endorsements can be added to your car insurance policy to enhance your coverage. The following are the most popular endorsements in Canada:

  • Damage to a non-owned vehicle: Covers you against damage to a car you rent
  • Loss of vehicle use: Pays your transportation costs should your car be getting repaired after an accident
  • Depreciation waiver: This coverage is perfect if you have a brand new car, as it guarantees that you will receive the entire value of your vehicle in the event of a write-off.
  • Accident forgiveness: If you purchase this coverage, your first at-fault accident will not get counted against you. Not all insurance companies offer this endorsement.
  • Family protection: This applies if you’re in an accident with a driver who doesn’t have insurance or has less coverage than you have and isn’t enough to cover your claim.

What Influences Car Insurance Costs in Canada?

There are several features that car insurance companies base your premiums on.

Vehicle Make, Model, and Production Year

Your premium is significantly impacted by your car’s make, model, and production year. If, for instance, you are driving a sports car, you will likely be paying a higher premium when compared to a sedan. The critical reasons for this are that sports cars are more likely to be involved in accidents and have a higher retail value.

Your Driving history

If you don’t receive many speeding tickets and are a safe driver, you can expect to pay lower premiums. However, expect to pay more if you have several speeding tickets and have previously been involved in collisions.

Demerit Points

Getting demerit points for driving violations like speeding and dooring a cyclist can also affect your car insurance premiums. Demerit points won’t influence your car insurance costs right away, but they will when your policy is up for renewal and your insurance provider runs a background check on your driving record.

Your Place of Residence

Your neighbourhood can be the result of you paying a higher premium than others. This is due to you possibly living in an area where there’s a history of several car insurance claims filed. So be prepared to pay if your neighbourhood has a lot of break-ins and collisions.

Your Age and Gender

Insurance is one of the few sectors that can legally discriminate in pricing based on age and gender. However, no matter what gender you are, you can expect lower premiums if you’re older. Once you’re in your golden years, premiums will increase again.

Men’s car insurance premiums are typically higher than women’s since men are renowned for engaging in riskier driving behaviour.

How to Reduce Your Car Insurance Premiums in Canada

Everyone wants to save money and pay less on their car insurance premiums. To get your premiums reduced, you should consider the following to cut down on your payments:

Increase Your Deductible

In the event of a claim, your deductible is the amount you must pay out of pocket before your insurance company will pay. You might save a lot of money on your monthly premiums if you choose a higher deductible. Consult with your insurance company about the various deductible options available to you.

Bundle and Save

If you’re a homeowner, you can bundle your home and car insurance with the same company. Insurance companies usually give discounts on both coverages if you sign for the bundle option.

Get Multiple Quotes and Save

Many of us often mistake renewing our car insurance policies and not getting multiple quotes elsewhere. As a result, you might be missing out on reasonable rates and adequate coverage with a different insurance company. So never settle with what you have or the first quote you receive, and instead, shop around before making any decisions.

Use our car insurance comparison tool!

How and Where You Can Purchase Car Insurance in Canada

Finding an insurance company and purchasing car insurance is a simple process.

  • Licensed insurance broker: A person who sells insurance for various insurance companies. The broker will shop the market for you to discover the ideal insurance provider that provides the coverage you need at the best rate.
  • Insurance agent: As a representative of a single insurance company, insurance agents will provide you with a quotation from their company. In this instance, you must also do your research with other companies to ensure you get the best coverage for you at the best rates.
  • Shop online yourself: This method has many benefits as you control what you’re looking for. However, insurance is usually a complicated subject, so you may want to speak to a professional to explain all the terms and conditions to ensure you’re getting what you want.

While shopping around for car insurance, be wary of what type of coverage you’re getting if you are looking for lower premiums, as you will get what you pay for. Consider the kind of coverage you want and purchase the one that’s best suited to your budget.

Car Insurance Claims

You don’t want to find yourself in a situation requiring filing an insurance claim, but it’s helpful to know what you can expect.

Scenario 1: Car Accident

The police must be contacted if you are involved in a car accident, and someone is wounded, or property damage exceeds the provincial limit. Police will respond to severe accidents involving a fatality, criminal activity, or damage to public property. Some cities provide Collision Reporting Centres where a police officer can evaluate the damage to your car within 24 hours for less severe accidents and supposing your vehicle is safe to ride.

It’s critical to follow these guidelines as soon as possible following an accident:

  • First, do not leave the scene of the accident.
  • To avoid injury or more damage, move your car out of traffic if it is safe to do so.
  • Keep track of the accident’s location, time of day, weather conditions, visible damage, and other pertinent information.
  • Collect the other driver’s information, such as their name, address, license number, insurance company name, and policy number.
  • Obtain eyewitness contact information, including the name and badge number of the police officer who responded to the incident.
  • Take photos of the damage to your car and any other vehicles involved in the accident.
  • Take photographs of the surrounding area, recording any property damage that may have occurred due to your accident.
  • Notify the authorities.
  • Notify your car insurance representative of the accident.

No matter who was the cause of the accident, it’s important you notify your car insurance company of the incident. They will then assign a representative to handle your claim.

Scenario 2: Your Vehicle is Damaged

If your car is damaged in an accident, the amount of compensation you receive will be determined by whether you were at fault and what coverage you have.

If you are at fault

Your car insurance provider will do an assessment to determine if you were at fault or not. The results are based on a set of Fault Determination Rules that encompass a wide range of accident types. You can be at fault anywhere between 0% and 100%, with anything over 25% increasing rates.

If you are deemed to be 50% or more at fault in a claim, the incident will be recorded on your driving record. If there’s an at-fault accident on your record, your premiums may increase. However, a few car insurance companies provide accident forgiveness, which allows you to have one accident before your premiums increase.

If you are not at fault

When you’re found not to be at fault, things operate differently. Even if you don’t have collision coverage, you’ll be insured up to your no-fault percentage of the policy limit if you have Direct Compensation – Property Damage Coverage.

Suppose you’re in an accident with a driver who isn’t insured. You can file a claim for the damages to your car under your policy’s Uninsured Automobile coverage, as long as the other driver can be identified.

If your car is damaged, your insurance provider will determine whether to cover the cost of repairs or if the damage is severe enough to write it off entirely. You get the monetary worth of your car at the time of the accident if you have a write-off.

Your car insurance provider will give you a list of preferred body shops for repairs. You are free to choose your own, but you will be responsible for any complications throughout the repair process. Do not start any repairs until your car insurance company has reviewed your claim and authorized the repair.

Scenario 3: You Are Injured

Getting injured in an accident might qualify you for accident benefits, no matter who was the cause of the accident. Your car insurance company will advise you what they will need to get the claim processed, which can include:

  • Prescriptions
  • Doctor’s notes
  • Any other supporting evidence

Scenario 4: Non-Accident Related Claims

Not all claims are related to accidents. If your car gets damaged in a non-accidental scenario, such as vandalism, you will get compensated depending on the type of coverage you have in place.

If you have comprehensive, all perils or specific perils coverage, you will be covered up to your policy limit, less your deductible. This is also true if your car gets stolen, although your possessions in your vehicle are not always insured.

When is a Claim Likely to be Denied?

It’s vital to remember that, irrespective of your coverage, an insurance company would most likely deny your claim if there was any criminal behaviour involved, such as the following:

  • Accidents that occur as a result of being under the influence of drugs or alcohol
  • Accidents that lead to a criminal charge, such as criminal negligence or a hit-and-run

Contrary to popular belief, filing a claim will not raise your premium. However, if you are found to be at fault throughout the claims procedure, your premium may increase. In addition, if you file many claims, your insurance provider may raise your deductible or cancel your coverage in the worst-case scenario.

How Much Coverage Do You Need?

You must select how much coverage you require in addition to which coverages to include in your policy. Although each province has a minimum requirement, it is not always sufficient. Consider the value of your car and the financial ramifications of a major accident when determining how much you’ll need.

Given the wide range of vehicle insurance coverage options available, it’s crucial to conduct your research before purchasing a new policy to ensure you have the suitable types and limits of coverage. Shop around to get quotes from more than one car insurance company that’s tailored to your needs.

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