Your Guide to Car Insurance coverage in Canada

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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!

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.

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
Car hits something

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.

Bodily injury

This aspect of liability coverage protects you if someone else is killed or injured. It covers the expenses associated with someone else’s injuries in an accident where you are at fault. This might include medical expenses, rehabilitation costs and legal fees.

Property damage

This aspect of liability coverage pays for damages caused to someone else's property, such as a fence or other structures. For example, if you accidentally hit a light post or guard rail with your car it covers the repair or replacement costs of the damaged property, as well as associated legal fees.

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.

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.

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.

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
Car hitting a car

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.

What it covers

Collision insurance covers the cost of repairs or replacement of your vehicle if it's damaged in a collision with another vehicle (including damage from a hit and run in a parking lot) or object, such as a tree or a fence. Whether you accidentally hit another car, or your vehicle is damaged in a single-vehicle accident, collision coverage can help cover expenses like towing, which can be very expensive these days.

Why you might want it

Collision coverage is optional in Canada, but it can be highly beneficial, especially if you have a newer or more valuable vehicle. If you rely on your car for daily transportation or if you live in an area with a higher risk of accidents, having collision coverage can provide valuable peace of mind. Here’s another way to look at it: is a few hundred dollars for collision coverage worth the cost of protecting your car that is worth thousands or even tens of thousands of dollars?

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.

Optional coverage

Accident forgiveness
Car and a shield

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.

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Frequently asked questions (FAQs) about
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.

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.

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.

In Canada, filing a car insurance claim typically involves the following steps:

  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. 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.

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