Auto Insurance for Newcomers to Canada

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What newcomers need to know about auto insurance in Canada

Car insurance is mandatory in Canada, but coverage and rates can vary among provinces and insurance companies. Auto insurance protects you from having to pay for car repairs in case of a collision or liability claim, such as damage to another person’s vehicle or bodily damage. Additional coverage may include comprehensive coverage for vandalism, theft, floods, fires, and coverage for rental cars if you opt for it.

In three provinces — British Columbia, Saskatchewan, and Manitoba — auto insurance is public, which means it’s administered by the provincial government. All other provinces and territories — Newfoundland and Labrador, Nova Scotia, Prince Edward Island, New Brunswick, Alberta, Ontario, Northwest Territories, Nunavut, and Yukon — have private insurance, which has more options for coverage and is regulated by a provincial body. Insurance companies in these provinces must apply to their regulator for rate increases. In Quebec, public insurance covers bodily damage, while property damage is covered by private insurance.

Irrespective of which province you live in and whether you have to opt for public or private insurance, as a newcomer to Canada, you will likely face a higher auto insurance premium.

Is my foreign driver’s licence valid in Canada?

The rules for exchanging your foreign driver’s licence vary among provinces (for instance, you can use your foreign driver’s licence for 90 days in Manitoba). When moving to Ontario, you can use your foreign driver’s licence for 60 days. After that, you need to exchange it for an Ontario driver’s licence if you want to continue driving. In Ontario, the Ministry of Transportation (MTO) currently allows those from the following countries to exchange their driver’s licence for an Ontario licence: Australia, Austria, Belgium, France, Germany, Great Britain, the Isle of Man, Japan, Korea, New Zealand, Northern Ireland, Republic of Ireland, Switzerland, Taiwan, and the United States.

For some countries, if you have more than three years of driving experience, you can fast track your Canadian licence by sitting for the G2 road test and get a full licence. For example, if you’ve moved from the United Kingdom, you can exchange your licence and skip the G1 level, but from an insurance perspective, your driving record begins the day you get your Canadian driving licence.

Why your driving history may not be honoured by insurance companies in Canada

Even if your foreign driving licence can be exchanged in Canada, your driving history may not be honoured by insurance companies. Most insurance companies do not honour driving experience outside of North America, but this also differs from company to company.

When determining your premium, insurance companies mainly take into account your age, gender, address, car model, how often you drive, your driving record, and claims history.

As a newcomer without a driving record in Canada, you will likely face a higher auto insurance premium.

“Newcomers see higher premiums because they don’t have experience with driving on Canadian roads, and aren’t used to the traffic, rules, and winter driving conditions,” explains Henry Lof, an insurance expert with RATESDOTCA.

Newcomers from the U.S., however, are exempt from this rule. “Assuming that they’ve held a good driving record in the States, their driving experience is honoured because the traffic, climate, and landscape is similar to Canada,” says Lof.

Newcomers from the U.S. need to supply a letter of experience from their previous insurance company detailing their previous driving record for a Canadian insurance provider to honour past driving experience while determining their insurance rate. Newcomers from other countries can do this, too, but the acceptance criteria will differ from provider to provider. Some insurance companies might credit newcomers with a maximum of three years’ driving history.

Some global insurance companies might honour the driving experience of customers who held a policy in their country of origin. They receive a Canadian-equivalent driving record of a maximum three years, provided the driver gets an Ontario G class licence and has had a licence in their originating country for three years or more.

How much can I expect to pay for auto insurance as a newcomer to Canada?

Insurance rates for newcomers to Canada are comparable to those for new drivers under the age of 25, who are considered high-risk drivers by virtue of being unfamiliar with Canadian roads and traffic and have a higher likelihood of getting into an accident. But just as new drivers gain experience on the road and their rate goes down as they get older, newcomers gain Canada-specific driving experience and will see their rate go down over time as well.

To get a sense of how much more newcomers are likely to pay for auto insurance, we looked at Ontario data from the RATESDOTCA auto insurance quoter, which demonstrates that as a person gains more years of driving experience, their annual premium decreases. For instance, the average lowest quoted premium for someone with zero to three years of driving experience is $5,214. That decreases by 63% once 20-30 years of driving experience are acquired.

Savings can be seen sooner than that, however. As drivers hit the four-year experience mark, the average lowest quoted premium goes down by $1,655.

Newcomers to Canada Auto Insurance

In addition to driving experience, insurance history also matters when it comes to your premium. For someone who’s been insured for fewer than three years, the average lowest quoted annual premium is $3,550. With more than 20 years of insurance history, that premium decreases by 57%. However, as is the case with driving experience, savings can be felt sooner than that. After four consistent years of insurance coverage, the average lowest quoted premium decreases by $1,426.

All trends demonstrate that the more driving experience someone has, and the more years they’ve been insured in Ontario, the lower the premium they’ll pay.

What newcomers to Canada can do to lower their auto insurance premiums

While you can’t change the fact that your years of driving experience may not be recognized by insurance companies in Canada— or how your premium is determined — here are some things you can do to lower your auto insurance premium once you get to Canada:

  • Get your G licence as soon as possible: Lof recommends that newcomers start this process immediately. If, for instance, you have 24 months or more driving experience in the last three years and a letter of experience from your insurance provider, you can take the G1 or G2 immediately. “Make sure you don’t sit on your G2 for long,” says Lof. “Get your G licence as soon as possible.”
    By graduating as quickly as possible to your full licence, you can lower your insurance rate.
  • Consider being added as a secondary driver to someone’s policy: “If there is another car in the household, see if you can be added to the policy as a secondary driver,” Lof says. “This is another way to build driving experience.” If the car is leased or owned in your name, you are deemed the primary driver and a secondary driver is someone who uses the car frequently.
  • Opt for a vehicle that’s cheaper to insure: The cost of repair or replacement is higher with newer cars, and subsequently, they have higher insurance costs than an older car. However, any vehicle that has a higher likelihood of being stolen can also come with a higher insurance premium. “One obvious recommendation would be to not opt for a brand new Ford Mustang, but rather a car that doesn’t require too much coverage,” says Lof, “like a family friendly vehicle with a high safety rating.”
  • Increase your deductible: The higher your deductible, the lower your premium will be. But a higher deductible also means having enough money set aside in case of a claim. Given your requirements and financial situation, it might be worthwhile to consider increasing your deductible to save more in the long term.
  • Opt for winter tires: In Canada, harsh winters are a reality, which is why many drivers use winter tires. Not only do they protect you against wintry terrain and climate conditions, they can earn you a discount on your car insurance. In Ontario specifically, you will save up to 5% on car insurance if you opt for winter tires since insurance companies are mandated to provide this discount.
  • Bundle your home and auto insurance: As you settle into your new life in Canada, there are multiple insurance products you will need. One way to save money on insurance is to bundle your home, condo, or tenant insurance with your auto insurance by purchasing both from the same insurance provider. Depending on the company, you can save anywhere from 5% to 15% on both auto and home insurance.
  • Compare insurance rates: One way to make sure you are getting the lowest rate in competitive, private markets like Ontario and Alberta is to shop around online for car and home insurance and compare options for the best value.
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