Standard car insurance provides protection for the driver, passengers, and any pedestrians involved in a car accident. Additional coverage may cover any damage to the vehicle.
It’s smart to familiarize yourself with the types of auto insurance so you know what you’re buying. While auto insurance varies from province to province, there are two types of coverage that are mandatory across Canada:
- Third party liability insurance. This pays for the damage you cause to other people’s property – for example, if you hit another car or someone’s fence. It also pays for injuries you cause to others in an accident, and legal defense costs if you are sued after an accident. Minimum coverage varies between provinces (for example, the minimum is $500,000 in Nova Scotia but $200,000 in Ontario) and you can choose the minimum required to drive legally in your province or a higher amount.
- Accident benefits. This pays for your medical costs, rehabilitation expenses and financial compensation, including income compensation, if you are injured in a crash. It also covers funeral expenses and payments to survivors if you are killed in an accident. This coverage is mandatory in all of Canada, with the exception of Newfoundland and Labrador.
Your policy may also include the following:
- Collision or disturbance coverage. This coverage pays for the cost of repairing damage to your car after a collision with another car or if it hits another object, such as a guardrail.
- full insurance. This cover pays for theft, damage from fire, hail, flood, vandalism, falling objects and animal strikes – for example if you hit a deer.
- Specific hazards: This coverage pays for specific perils listed on your policy, including: fire, theft, attempted robbery, lightning, hail, rising water, earthquake, windstorm, explosion, riot, civil commotion, fall or forced landing of aircraft or part of aircraft, And stranding, drowning, burning, deviating from its course, or colliding with any type of means of transportation, or on which the vehicle is transported on land or in water.
- All risks: This is the most comprehensive (and most expensive) coverage because it combines collision or traumatic and comprehensive coverages. It also covers loss or damage if someone who lives with you or someone who works for you steals your car.
- Direct Compensation Damage to Property (DCPD). With DCPD coverage, your insurance company pays for repairs to your car when you’re not at fault in a collision. It is compulsory in Nova Scotia, Ontario, New Brunswick, Newfoundland and Labrador, Prince Edward Island, Quebec and Alberta.
- Uninsured cars: This coverage protects you (and your family) if you are injured or killed by a hit-or-run driver or an uninsured motorist. It also protects you if you are hit by an uninsured motorist while bicycling or walking and covers damage to your vehicle caused by a specified uninsured motorist.
Optional (also known as endorsements or passenger) coverage includes:
- Loss of use coverage covers the cost of renewing a vehicle (or alternative forms of transportation, such as taxis or bus fares) while your vehicle is being repaired. In Ontario this is known as OPCF (Ontario Policy Change Form) 20 and in Alberta it is known as SEF (Standard Endorsement Form) 20.
- Accident Waiver/Forgiveness (OPCF 39) protects your insurance premium from going up when you have a first accidental collision.
- Liability for damage to non-owned vehicles (OPCF 27 or SEF 27) extends to coverage for a borrowed vehicle, whether it belongs to a friend or is rented.
It’s also a good idea to shop around for car insurance before you buy the car. Without insurance, you may not be able to drive your new car far from the dealer’s location. You will need proof of insurance before you can take the car home with you.
Additionally, it’s smart to budget for the cost of insurance along with loan repayments and car maintenance expenses. While many factors affect what you’ll pay for insurance, the type of car you drive plays a role, so it’s a good idea to have an idea of which cars are the most and least expensive to insure before closing the deal.
The Canadian Motor Vehicle Loss Experience Classification (CLEAR) assesses how likely and how much a particular vehicle is to be involved in a claim. Using this data, the Insurance Bureau of Canada publishes an annual edition of How Cars Measure that analyzes statistics on the number and cost of collisions, overall DCPD benefit claims and accidents for the most common car models in Canada.
Here’s what you need to know:
- Have a maker and model in mind. In the car buying process, you have most likely identified the types of cars you are interested in. For example, you want a brand new Toyota Camry or you want to test drive a used Honda Civic. The insurance agent can give you quotes for some models, so you can budget accordingly.
- Find out what types of coverage you will need. Each county has its own mandatory insurance requirements, but you can also choose higher coverage or additional endorsements. And if you’re taking out an auto loan or lease, your lender or leasing agent will likely require collision and comprehensive insurance.
- Compare quotes from multiple car insurance companies. An independent insurance agent or online car insurance comparison site is an effective way to shop for rates. Rates vary widely between insurance companies, so you’ll want more than one or two quotes. Make sure to compare quotes for the exact same level of coverage to get an apples-to-apples comparison.
Then you can ask your insurance agent to prepare a policy. If you choose the vehicle and know the vehicle identification number (VIN), this part is very easy. You can have your document ready to go before you arrive at the agency. If you don’t have a VIN yet, ask if the dealership can set up a policy with the information you have, such as the drivers at your home and the address where you’ll park the car. Once you’ve decided on the car, contact the dealership with the VIN to complete your car insurance policy purchase.