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At first glance, car insurance appears intimidating. Policies are full of legal jargon and can be hard to understand, especially if you are new to driving, or new to Canada. This guide covers the basics and we hope it helps you to understand how car insurance works.
The law is clear. Every Canadian vehicle owner must have auto insurance in order to operate your vehicle. It is compulsory in all territories and provinces. If you are caught driving without insurance, your license can be suspended, your vehicle can be confiscated, and you will face a hefty fine.
In Ontario, for example, fines range from $5,000 to $25,000 for a first offence. You must also pay a 25% victim fine surcharge (e.g. an extra $2,500 if you receive a $10,000 fine). For a second offence, fines can be up to $50,000.
Even if you get lucky and escape with a fine on the lower end of the scale, your future insurance premiums will increase dramatically.
Each province has its own rules and regulations when it comes to mandatory coverage, but there are some commonalities. All Canadian car insurance policies must include the following:
While third-party liability, uninsured automobile, and accident benefits insurance are mandatory across the country, there are many optional coverages that you can add to your policy to increase your coverage for an additional cost.
The most popular optional coverages are collision and comprehensive insurance. In fact, they are mandatory in Saskatchewan and Manitoba, and usually required by the lender (such as a bank) if you have taken out a loan to pay for your car in any other province.
You can add endorsements to your policy to enhance your coverage. Some of the most popular endorsements are outlined below:
Aside from choosing which coverages to include in your policy, you also have to decide how much coverage you will need. Each province has a minimum required amount, but it’s not always enough. When deciding how much you will need, consider the value of your car, and the financial consequences of a serious accident.
Given the vast amount of auto insurance coverage options available, it is important to do your homework ahead of purchasing a new policy to ensure you have the appropriate coverage types and limits. You're encouraged to shop around and use our free car insurance comparison service to get several quotes tailored specifically to your needs.
No one ever wants to end up in a situation resulting an insurance claim, but unexpected situations do occur and it's good to know what you can expect.
If you're involved in a car accident and someone is injured or there is property damage over the provincial limit, the police must be notified. For serious accidents involving a fatality, criminal activity or damage to public property, police will arrive on the scene. For less serious accidents, and assuming your car is safe to drive, some cities have Collision Reporting Centres where a police officer can inspect the damage to your vehicle within 24 hours.
Immediately after an accident happens, it is important to follow these rules:
You’ll want to report the incident to your insurance company as soon as you can, regardless of who you think was at fault. The insurance company will assign someone to handle your claim.
If your vehicle has been damaged, the type of compensation you receive will depend on whether you're found to be at fault, and the type of coverage you have.
Whether or not you're found at fault will depend on the assessment done by the insurance company. Outcomes are based on a set of Fault Determination Rules, covering dozens of types of accidents. You can be found anywhere from 0% to 100% at fault; anything above 25% will likely lead to a rate increase.
Insurance companies assign fault without input from the police. You might not have broken any laws, but could still be at fault for an accident. Likewise, a ticket from a police officer does not always mean you'll be found to be at fault by the insurance company.
If you have collision coverage and are involved in an accident where you're found to be at fault, you'll be covered up to the policy limit, minus your deductible. If you do not have collision coverage, the insurance company will not cover any repair costs.
Things work differently when you're found not at fault. If you have Direct Compensation - Property Damage Coverage (mandatory in Ontario), you will be covered up to your no-fault percentage of the policy limit, even if you don't have collision coverage.
If you're involved in an accident with a motorist who's not insured, you can make a claim for the damages to your car under the Uninsured Automobile coverage portion of your policy, as long as the person can be identified.
If your vehicle has been damaged, the insurance company will decide whether to cover the cost of repairs, or if the damage is serious enough to completely write it off. In a write-off, you receive the cash value of your car at the time of the accident.
For repairs, your insurance company will provide a list of their preferred body shops. You can choose your own, but if issues arise with the repair work, you will have to sort it out yourself. Do not get any repairs done until the insurance company has had a chance to review your claim and authorize the work.
If you've been injured in a car accident you may be entitled to accident benefits, regardless of who’s at fault. Keep hold of all doctor’s notes, prescriptions, and other supporting evidence. Your insurance company will tell you what else they need to process the claim.
If your vehicle is damaged in a non-accident circumstance (e.g. vandalism), compensation will depend on your coverage. If you have comprehensive, all perils, or specific perils coverage, you will be covered up to your policy limit, minus your deductible. This also applies if your car is stolen, but the belongings in your car are not always covered.
It is important to note that regardless of the coverage you have, an insurance company will likely deny your claim if any criminal behaviour was involved, including the following circumstances:
Contrary to popular opinion, your premium will not go up due to you making a claim. However, if during the claims process you are deemed to be at fault, your premium could increase. Making lots of claims can result in the insurance company increasing your deductible or, in more extreme cases, discontinuing your coverage.
For more information on car insurance in Canada, check out our catalogue of auto insurance guides. If you need specific information on your province, learn more about auto insurance in Ontario and Alberta.
Every driver has different requirements when it comes to car insurance, but we all need affordable premiums with adequate coverage, and this is where RATESDOTCA can help. In just a few minutes, you get multiple quotes in one place. Easily compare prices and coverages, and secure a great deal on car insurance today.