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Types of Car Insurance in Canada

While most insurance types are optional based on personal needs, one necessary insurance policy is car insurance.

So yes, that means when you come of driving age or are looking to buy a new car, you also need to think about your auto insurance coverage. And although choosing the right car insurance policy isn’t the most exciting task, it’s definitely needed before you drive that new car off the lot.

If you’re stuck on what types of car insurance policies to look into and which ones are mandatory, keep reading for the lowdown on car insurance in Canada!

What is car insurance, and do I need it?

The basic purpose of car insurance is to provide financial protection for drivers in case of bodily harm or vehicle damage resulting in collisions or accidents such as fires or thefts. As with all other insurance policies, policyholders will pay a premium (typically monthly) to protect themselves from any financial loss due to these accidents.

Whether you’re driving a car, truck, or motorcycle, you need car insurance if you live in Canada. If you’re found not to have car insurance, you could be facing a hefty fine and even risk having your license suspended. The level of mandatory car insurance is based on what province you’re in, so before committing to a policy, chat with an insurance broker or financial advisor to ensure that you’re fully covered based on the province requirements.

Mandatory Types of Car Insurance in Canada

Although there are several types of car insurance options available to drivers, there are four basic essentials that make up most of Canada’s policies.

Third-party liability coverage

Third-party liability coverage is the most basic type of car insurance. Its purpose is to financially cover the policyholder against any damage they cause to another vehicle or driver in that vehicle.

Third-party liability coverages will pay for repairs of the other car and medical bills as a result of an accident that you caused. Many provinces will require that your policy covers $200,000 in damages aside from Quebec, where the minimum is $50,000.

With that being said, most policyholders choose to up their coverage to a few million to ensure that it covers any payments needed.

Uninsured motorist

In all provinces aside from Alberta, you also need to have uninsured motorist coverage.

Uninsured motorist coverage provides drivers with financial protection when they are involved in an accident with someone who does not have car insurance.

This coverage type will pay for medical bills for you and your family in a collision caused by an uninsured driver. It can also cover car damage if the uninsured driver can be identified.

Accident benefits

If you are injured due to an accident or collision with another vehicle, accident benefits will cover those medical bills not paid for by your health insurance.

It also can provide compensation to cover things like income replacement and long-term treatment if needed.

Finally, accident benefits can cover funeral expenses if you pass away or act as compensation for your family members if you’re killed in a collision. Accident benefits are mandatory for all drivers in Canada except in Newfoundland and Labrador.

Direct Compensation Property Damage

If you live in Ontario, Nova Scotia, Quebec, PEI, or Newfoundland and Labrador, you’ll also need to have direct compensation property damage.

This means that if you’re in a collision that wasn’t your fault, your insurance company can cover the damage costs instead of having to wait for the at-fault driver to go through their insurer.

Additional Types of Car Insurance in Canada

While third-party liability, uninsured motorist, accident benefits, and direct compensation property damage make up the essentials of mandatory auto coverage in Canada, there are a few additional coverage options available to drivers.

Collision coverage

In addition to protecting you from third-party liabilities, collision coverage will protect you financially in a situation where you hit something other than another car, such as a light post or guard rail. Collision coverage typically costs a bit more because you’re covered more, but it also usually requires a set deductible at the time of claim.

Comprehensive coverage

Comprehensive coverage will provide you with the most protection out of all the policy types.

It covers the typical medical bills and vehicle repairs that come with collisions, but it also protects you in the event of a flood, theft, fire, and more. It also protects your car when you’re not driving it and even if your car is stolen.

Like collision coverage, comprehensive coverage does require a deductible at the time of claim. The lower the deductible is that you agree to set, the higher your monthly premium will be.

Specified perils and all perils

Last but certainly not least is specified perils and all perils.

Specified perils cover certain types of vehicle damage such as earthquakes, fire, and theft. On the other hand, all perils combine the type of protection you receive under collision and comprehensive coverage to protect you against all types of damage.

All perils coverage is definitely more costly than other policies because, as the name suggests, it covers anything life may throw at you.

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Jean-Maximilien is an expert in Canada and France about Loyalty programs, Credit cards and Travel. He is the Founding President of Milesopedia.

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