Your guide to car insurance coverage in Canada
Car insurance is a must-have for drivers in Canada, but understanding all the different coverage types can be overwhelming! Don't worry if the world of car insurance coverage seems confusing – we're here to help. In this guide, we'll break down the essentials of car insurance coverage in Canada. From understanding the various types of coverage to knowing what's mandatory in your province, we've got you covered!
Please note that every provincial car insurance policy has policy conditions and exclusions for every type of coverage. While this page does not specifically mention these policy conditions and exclusions, they do impact the coverage available to you. If you have any questions about the policy conditions and exclusions for any coverage, please contact an insurance representative for advice.
Car insurance coverage essentials
When it comes to car insurance coverage in Canada, buckle up and get ready to understand car insurance like a pro!
Mandatory coverage
Mandatory coverage is the bare minimum required by law in the province you live in. It's like the foundation of your car insurance. It ensures that you have the basic protection you need in case of an accident. The specifics of mandatory coverage can vary by province, but it typically includes liability coverage, which protects you if you accidentally damage someone else's property or cause injuries to others.
Standard coverage
Standard coverage goes beyond the basics and gives you more comprehensive protection with coverage options like collision coverage, comprehensive coverage, all perils coverage and more. It's like adding some turbo power to your insurance! Standard coverage is designed to help you repair or replace your vehicle if it's damaged in a collision so you can you get back on the road in no time.
Optional coverage
Get ready to customize your coverage like a boss! Optional coverage is where you can add some extra horsepower to your policy, with add-ons like Accident Forgiveness, roadside assistance or new car protection. You can choose the add-ons you want to give you extra financial protection and a stress-free drive.
Remember, insurance is not a one-size-fits-all deal. It's all about finding the right mix of coverage for you. You can always chat with our insurance pros to help you create a policy that matches your needs and gives you the confidence to hit the road!
What is a deductible?
A deductible is the portion of the insurance claim that you agree to pay out of your own pocket before your insurance coverage kicks in. It's like a shared responsibility between you and your insurance company. For example, if you have a $500 deductible and you make a claim for $2,000, you would need to pay the first $500, and then your insurance company would cover the remaining $1,500. So, the higher your deductible, the more you're responsible for paying upfront. Going with a higher deductible could be a great way to reduce the price of your monthly premium. It's important to choose a deductible that you're comfortable with and that aligns with your budget.
What is a premium?
Your premium is the amount you pay to your insurance company for your car insurance coverage. It's like a regular payment to keep your insurance policy active. The premium can vary based on factors such as your driving history, the type of car you have and where you live. Think of it like a subscription cost for financial protection for your vehicle. It's important to pay your premium on time to maintain continuous coverage and enjoy the worry-free driving that comes with having car insurance.
Types of car insurance coverage in Canada
With so many different types of car insurance coverage to consider, it can feel overwhelming. Whether you’re a new driver or have been on the road for years, we’re here to break it down.
Mandatory coverage
Third-party liability coverage
Liability coverage is mandatory everywhere in Canada, and it protects you if you’re at fault in an accident. It pays for claims resulting from lawsuits against you up to the coverage limit, and pays for the cost of settling the claims. It consists of two main components: bodily injury and property damage.
Why do I need liability coverage?
Liability coverage is mandatory in Canada to make sure that all drivers have a minimum level of financial protection. It helps safeguard the rights and well-being of other drivers, passengers, pedestrians and property owners who may be affected by an accident. By having liability coverage, drivers can meet their financial obligations and provide compensation to those who suffer losses or injuries due to their actions. Without liability coverage, you could face hefty fines for driving without the legally required insurance coverage as well as be liable to pay for any damages you cause in an accident.
What is the minimum liability coverage required in Canada?
Each province has a minimum amount of required liability coverage that varies from $50,000 in Quebec to $500,000 in Nova Scotia. The remaining provinces are $200,000. You should note that this minimum coverage amount might not be enough for all situations, and most insurers recommend getting at least $1,000,000 or $2,000,000 in liability coverage.
How much liability insurance coverage do I need in Canada?
The amount of liability insurance coverage you need in Canada depends on several factors, including the how much you drive in the United States, your budget, and your risk tolerance. You should buy as high a limit as you can afford, and most people purchase at least $1,000,000 of liability insurance coverage.
Let’s consider driving in the United States. You’ve probably heard about large court settlements given by juries for car accidents! On top of that, you should also consider the exchange rate of the US dollar versus the Canadian dollar. Depending on the exchange rate, a $1,000,000 third party liability limit (in Canadian dollars) may only be worth $750,000 USD. Are you comfortable driving in the United States with only a $750,000 third party liability limit?
It's important to strike a balance between adequate coverage and affordability. Consult with an insurance professional who can assess your specific needs and recommend suitable coverage limits for your situation. You should strongly consider getting at least $1,000,000 if not $2,000,000 in liability coverage.
Accident benefits coverage
Accident benefits coverage provides you with benefits if you are injured in a car accident, regardless of who caused the accident. This includes supplementary medical, rehabilitation and attendant care, caregiver, non-earner and income replacement benefits. The specific coverage varies by province, but generally includes:
Are accident benefits coverage mandatory in all provinces of Canada?
Yes, accident benefits coverage is mandatory in all provinces of Canada except for Newfoundland. Each province has its own requirements and minimum coverage limits. It ensures that all motorists have access to essential benefits in the event of an injury resulting from a car accident, regardless of fault. In Quebec, the public automobile insurance plan offered by the SAAQ provides similar coverage in the event of injury or death because of a car accident.
How does accident benefits coverage work in the event of an injury in a car accident?
Accident benefits coverage in Canada operates on a no-fault basis, meaning that no matter who is at fault in a car accident, eligible individuals can receive benefits. If you get into a car accident and are injured, you should contact your insurance provider as soon as possible to start the claims process.
Once your claim is opened, you may need to complete some forms and provide supporting documentation such as medical records, receipts for expenses, and proof of income loss. Your insurance company will assess your claim based on the information provided.
Accident benefits cover the drivers listed on the policy anywhere within Canada and the United States (all 50 states) while they are driving, a passenger in another vehicle, or as a pedestrian in the event they are injured by a vehicle.
Direct compensation property damage coverage
Direct compensation property damage (DCPD) insurance covers damage to your vehicle or its contents, and it also covers the loss of use of your vehicle or its contents if another person was at fault for the accident. It is called direct compensation because even though someone else causes the damage, you collect compensation directly from your own insurer. DCPD provides a more efficient and streamlined process for resolving property damage claims, allowing you to receive compensation quickly and get your vehicle repaired or replaced.
There are usually conditions that need to be met for this coverage such as:
- The accident must take place in your province
- There must be a least one other automobile involved in the accident
- At least one of the other automobiles in the accident must be insured by an insurer in your province or they have signed a DCPD agreement with the provincial regulator
If these conditions are not met, then you can make a claim under collision or all perils coverage if the vehicle has this coverage. Most policies don’t have a direct compensation property damage deductible, but you can add one to lower your premium if permitted by your province. In some provinces, you can opt out of DCPD if you request it and sign the applicable endorsement.
What is the difference between direct compensation property damage (DCPD) and collision coverage?
Direct compensation property damage (DCPD) coverage and collision coverage both provide coverage for property damage to your vehicle, but they operate differently. DCPD coverage applies in provinces with a no-fault system, where you claim with your own insurance company, while collision coverage applies regardless of fault, and you can make the claim with either your own insurance company or the at-fault driver's insurance company.
Is direct compensation property damage (DCPD) coverage mandatory in Canada?
Direct compensation property damage (DCPD) coverage is mandatory in Alberta, New Brunswick, PEI, Newfoundland & Labrador and Nova Scotia.
Uninsured automobile coverage
(Also known as uninsured motorist coverage)
Uninsured or underinsured motorist insurance protects you and your family if you are injured or killed by an unidentified driver (hit-and-run) or an uninsured automobile. In some provinces, it also provides coverage for damage to your vehicle caused by an identified owner or driver of an uninsured automobile. In some provinces this is included as part of accident benefits coverage.
What is an uninsured automobile?
An uninsured automobile is a vehicle where neither the driver nor the vehicle owner has liability insurance to cover bodily injury or property damage. This means they are driving without the minimum mandatory car insurance required in their province in Canada. Driving without mandatory car insurance is illegal in Canada, and can result in hefty fines, licence suspension and even jail time in certain situations.
What should I do if I get into an accident with an uninsured driver?
If you get into an accident with an uninsured driver in Canada, safety is the top priority. First of all, move to a safe location if possible and check if anyone requires immediate medical attention. Call emergency services if necessary. Once everyone is safe, you can follow these steps:
- Gather information: Get the uninsured driver's details including their name, contact details, license plate number and the make and model of their vehicle. If there are any witnesses, try to obtain their contact information as well.
- Notify the police: Contact the local authorities to report the accident, and remember to mention the driver's lack of insurance.
- Document the accident: Take photos of the accident scene, including any damage to both vehicles. This visual evidence can be useful during the claims process.
- Contact your insurance company: Notify your own insurance company about the accident and inform them that the other driver is uninsured.
- Consult with a legal professional: Consider seeking legal advice to understand your options and rights. They can guide you on how to proceed.
- Pursue legal action if necessary: Depending on the circumstances and the extent of the damages, you may need to take legal action against the uninsured driver to recover your losses. Consulting with a lawyer can help you understand the legal steps involved in pursuing a claim against an uninsured driver.
Remember, it's important to have uninsured motorist coverage as part of your own car insurance policy. This coverage can provide financial protection in the event of an accident with an uninsured driver. Check your policy to see if you have this coverage and review the specific terms and conditions with your insurance company.
Mandatory car insurance coverage by province
While liability insurance is mandatory everywhere in Canada, the specific requirements for car insurance coverage can vary as each province and territory sets its own rules for mandatory car insurance coverage. Here's a breakdown of the mandatory coverage required in each province and territory
For more information, please visit the Insurance Bureau of Canada.
Standard coverage
Collision coverage
Collision coverage is a type of car insurance that helps pay for damages to your vehicle if you're involved in a collision, regardless of who is at fault.
Is collision coverage mandatory in Canada?
Collision coverage is not mandatory by provincial law, except in Manitoba where it is included in the mandatory all perils coverage. However, if you have a car loan or lease, your lender or leasing company will usually require you to have collision coverage until the loan or lease is paid off, as well as DCPD and comprehensive coverage. Even if it is not mandatory, you may want to opt for collision coverage as it protects you from having to pay out of pocket for expensive repairs to your vehicle following a car accident.
Comprehensive coverage
Comprehensive coverage is a type of car insurance that helps protect your vehicle from non-collision incidents. It protects you from unexpected events that are beyond your control, such as theft, vandalism, fire, natural disasters, or hitting an animal.
What is the difference between comprehensive coverage and collision coverage?
Comprehensive coverage and collision coverage are two different types of car insurance in Canada. Comprehensive coverage protects your vehicle from things like fire, theft, vandalism, flying or falling objects, and natural disasters. Collision coverage, on the other hand, takes care of damages from accidents with other vehicles or objects. They offer complementary kinds of protection, and you can choose one or both types of coverage based on your needs and the value of your vehicle. Essentially, if damage to the vehicle is not caused by a collision or upset, then it is covered by comprehensive insurance. (Subject to policy exclusions.)
All perils coverage
All perils coverage is a type of coverage that combines the protections of collision and comprehensive coverage. It's like having the best of both worlds in a single policy, providing broad protection against a wide range of risks! However, it's important to evaluate your specific needs, budget, and the value of your vehicle to determine if this comprehensive coverage is the right fit for you.
Specified perils coverage
Specified perils coverage is a type of car insurance that covers your vehicle against specific listed perils. Some of the most common perils include theft or attempted theft, fire, lightning, windstorm, hail, rising water, earthquake, explosion, riot or civil disturbance, falling or forced landing of aircraft or parts of aircraft. (There may be some provincial differences.)
While specified perils coverage is cheaper than comprehensive coverage, it provides less coverage and is less popular. Comprehensive coverage provides better coverage and is therefore strongly recommended over specified perils coverage.
What is the difference between all perils and specified perils coverage?
While there may be some minor differences between provinces, the main difference between comprehensive and specified perils coverage is that specified perils coverage does not cover flying objects (e.g. rocks coming up from the roadbed and breaking the windshield) or vandalism (e.g. someone keys your automobile). Please note that vandalism is considered a different peril to a riot or civil disturbance.
Optional coverage
Accident forgiveness*
An accident forgiveness is an optional endorsement offered by some insurance providers. It is a type of car insurance that helps to and prevent an increase in your insurance premium after your first at-fault accident. It can be valuable if you're a safe driver but worry about the financial consequences of a potential accident. If you want to safeguard your premium from increasing after your first at-fault accident, accident forgiveness coverage may be a great choice for you! Remember, accident forgiveness protection does not follow you if change insurance companies.
Roadside assistance*
Roadside assistance is an optional add-on that some insurance companies offer for extra peace of mind and convenience. It provides support and services in case you have a vehicle breakdown or emergency while you're on the road. Roadside assistance services can include:
- Towing
- Battery jump-starts
- Fuel delivery
- Flat tire change
- Lockout assistance
- And more!
Roadside assistance coverage is optional but can be incredibly useful, especially if you frequently travel or have an older vehicle that may be more prone to breakdowns. If you value convenience, want the assurance of immediate assistance in case of emergencies, and prefer not to worry about finding and paying for services when you need them, roadside assistance coverage is a great option!
Rental car coverage*
Rental car coverage, also known as transport replacement or loss-of-use coverage, is a type of car insurance that ensures you have temporary transportation if your vehicle is being repaired due to an accident or covered incident. It's like having a backup plan to keep you mobile and avoid disruptions to your daily life!
Rental car coverage covers the cost of renting a replacement vehicle while your car is in the shop for repairs up to the limit you are insured for. It allows you to continue your daily activities without interruptions, ensuring that you have a vehicle to drive during the repair period. If having continuous access to a car is essential to your daily life and responsibilities, rental car coverage can be a great option.
*Remember, the availability and specific details of these coverage options may vary depending on your insurance provider. It's important to review your policy and consult with an insurance professional to understand the coverage options available to you and determine what suits your individual needs best.
Rental car damage coverage*
When you rent a car, you need to insure it against damage. That protection for physical damage can come from your car insurance company or the rental car company, but purchasing the coverage from your insurer will likely save you money. All insurers will have a limit per occurrence on this coverage. Insurers will often package rental car coverage and rental car damage coverage together as you typically need both coverages to be properly protected.
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Frequently asked questions (FAQs) about
car insurance coverage in Canada
What factors affect the cost of car insurance coverage in Canada?
Several factors influence the cost of car insurance coverage in Canada, including:
Age and Gender
Younger drivers and males generally face higher insurance rates due to a perceived higher risk.
Driving Record
The past is often a predictor of future events. Therefore, a clean driving record with no accidents and/or traffic violations will usually result in lower insurance premiums. The number of years you have been licensed also has an impact, as the more driving experience that you have often translates into fewer accidents. If there are other listed drivers on the vehicle besides yourself, their record will often impact the overall vehicle insurance premium too.
Vehicle Make and Model
Canadian insurers use the Canadian Loss Experience Automobile Rating (CLEAR) system to assess how likely it is that a specific passenger vehicle will be involved in a claim and what that claim will cost. A lower CLEAR ranking indicates a lower claims risk, which can potentially lead to lower insurance rates. For example, insurers may quote a lower premium for a vehicle that costs more but has:
- An advanced driver-assistance system (ADAS)
- Anti-lock brakes
- Dual and side airbags
- Side-impact door reinforcements
- Anti-theft devices
- Winter tires
A higher CLEAR ranking indicates a higher claims risk and may result in higher auto insurance rates. Insurers may quote a higher premium for a vehicle that is less expensive to buy and features:
- Minimal or basic loss-prevention features
- Lower-than-average or limited safety and accident-prevention equipment
If you are considering a few different vehicle models for your next purchase, call your insurance representative first to see which model will give you the best insurance premium. You may be surprised but glad you checked!
Location
Insurance rates can vary considerably based on the region you live in. Urban areas with higher population densities and increased risk of accidents or theft often have much higher premiums than rural areas.
Insurance History
Whether you have ever had your own auto insurance policy or been listed as a driver will usually impact your rates. Additionally, the length of time you've been insured without any lapses can affect your rates in some provinces.
Deductible Amount
A higher deductible can lower your monthly premium, but you'll pay more out of pocket. Direct compensation, all perils, collision, comprehensive and specified perils coverage usually have various deductible options to choose from.
The amount that you drive
This includes the number kilometres you drive in a year and if you commute to work or school. The more you drive, the higher your premium will be.
What happens if I drive without mandatory insurance in Canada?
Driving without the required car insurance in Canada is a serious offense. If you are caught driving without mandatory insurance in Canada, you could be fined up to $50,000, depending on your province. Your licence can be suspended, you will be liable to pay for damages if you cause an accident, and you could even face jail time if it’s not your first offense.
Can I change my car insurance coverage during my policy term in Canada?
Yes, it is possible to make changes to your car insurance coverage during your policy term in Canada. If you find that your current coverage needs adjustment, or you want to add or remove certain coverage options, you can contact your insurance provider to discuss the changes. However, it's important to note that making changes to your policy may result in adjustments to your premium. Your insurance company will provide guidance on the process, any potential fees or penalties, and the impact on your coverage and premium.
How do I file a car insurance claim in Canada?
In Canada, filing a car insurance claim typically involves the following steps:
- Contact Your Insurance Provider: Report the incident to your insurance company as soon as possible. Provide accurate details about the accident, including the date, time, location, and any involved parties.
- Gather Information: Collect relevant information such as the names, contact details, and insurance information of the parties involved, as well as any witnesses. Take photos of the accident scene and document the damages sustained.
- Complete Claim Forms: Your insurance provider will guide you through the claim process and provide the necessary forms. Fill out the forms accurately and include all relevant information.
- Provide Supporting Documents: Depending on the nature of the claim, you may be required to submit supporting documents, such as police reports, repair estimates, medical bills, and other relevant paperwork.
- Cooperate with the Claims Adjuster: Your insurance company will assign a claims adjuster to assess the damages and determine the coverage and settlement. Cooperate fully with the adjuster and provide any additional information they may request.
- Repair or Replacement: Once your claim is approved, your insurer will provide guidance on repairing or replacing your vehicle. They may have preferred repair shops or specific procedures to follow.
Make sure you understand the specific claim process outlined by your insurance provider and quickly provide all necessary documentation. This will help you to have a smooth and efficient claims experience.