What is Car Insurance?

Is Car Insurance Mandatory in Canada?

Yes, car insurance is mandatory in Canada.

It is against the law to drive a car without insurance.

Every province in Canada has its rules and regulations around car insurance.

If you’re involved in a car accident, your auto insurance can protect you , your vehicle and any liability that arises if the accident harms another person or damages their vehicle or property.

Did You Know

Some provinces own and operate their own auto insurance provider.

In Newfoundland, Prince Edward Island, Nova Scotia, New Brunswick, Ontario, Alberta, Yukon, Nunavut and the Northwest Territories, car insurance is provided by private companies that offer different levels of coverage to choose from at different price points.

In Quebec, Manitoba, Saskatchewan, and British Columbia, drivers must purchase public auto insurance, meaning that the insurance carrier is owned and operated by the government in that specific province.

In some cases, basic or mandatory coverage can be purchased through the government owned corporation, while add-on or extended coverage can be purchased from a private provider.

Types of Car Insurance Coverage

1. Third-Party Liability Coverage

Suppose you are in an accident and another person is physically injured or their vehicle or other property is damaged.

In that case, third-party liability coverage will protect you from paying for these out-of-pocket damages if a liability claim is filed against you.

2. Collision Coverage

Collision coverage will pay for damages to your vehicle due to the insured driver’s fault.

3. Comprehensive Coverage

Like collision coverage, comprehensive coverage will cover the cost of damages to your vehicle, but these damages do not have to come from a vehicle collision.

They can include damages caused by fire, theft, vandalism, acts of nature like hail or ice storms, animal damage and other things.

4. Specified Perils and All Perils

Specified perils coverage covers damages caused by a specific list of events outlined in your policy documents.

This list typically includes events like lightning and earthquakes.

All perils coverage includes all causes of loss except for the ones outlined explicitly as exclusions in your policy documents.

Two guy friends driving to a barbeque

Premiums

In simple terms, a car insurance premium is the amount of money you pay the auto insurance provider for the coverage on your vehicle.

You must continue to pay your car insurance premiums for your coverage to stay intact.

Most insurers provide a variety of options in terms of how payments are made.

Many people decide to pay their premiums monthly and split up the cost of their insurance evenly over the year.

Others opt to split the cost of their premiums in half and pay every six months, while some decide to pay their entire premium up-front and not have to think about it for another year.

Many factors can influence your insurance premiums.

These include your age and gender, where you live, where you park, your driving history, including any previous accidents or traffic violations, your credit score, the length of time you’ve been driving, the distance you drive to work and more.

Deductibles

An insurance deductible comes applies when you need to make a car insurance claim.

The deductible is the portion of the claim amount that you are responsible for.

For example, suppose you’re vehicle is damaged and costs $8,000 to repair.

If your deductible is $1,000, the insurance company will pay $7,000 of the claim while you are responsible for the other $1,000.

With the same deductible, if your repairs cost less than $1,000, you will be responsible for 100% of the cost.

The amount of your deductible is set when you purchase your policy.

You generally have some options when it comes to setting your deductible.

Generally, insurers will offer a lower premium with a higher deductible or a higher premium with a lower deductible.

When selecting your policy, this is a meaningful conversation to have with your insurance provider.

Did You Know

You can choose how often you pay your car insurance premiums, either monthly or annually.

Car Insurance Claims Process

A car insurance claim is a request to have your insurance provider cover the expenses involved in getting your vehicle fixed after it has been damaged.

If substantial damage to your vehicle has occurred, you probably need to make an insurance claim.

The first thing to do is call your insurance provider.

Their phone number is available on the little slip of paper that you carry in your vehicle as proof of insurance.

They will walk you through the process of opening and submitting a claim.

If a collision or vandalism is the cause of damage, the next thing to do is file a police report.

Your insurance company may ask for the report number as part of the claim.

You will be contacted by an insurance adjuster who will assess the damage to your vehicle and how much it will cost to repair.

They will provide you with a damage report.

While some insurance companies operate their own body shops to do their repairs, most insurance companies have a pre-approved list of repair facilities that they recommend using to have your vehicle fixed.

Some may demand that you use one of these businesses, while others will allow you to choose your own and submit quotes for comparison.

Frequently Asked Questions

  • What does car insurance mean?
  • Why do you need insurance on a car?

Samantha Kohn is a marketing and communications professional and freelance writer with expertise in the financial services, financial technologies and automotive spaces.

Sam is an avid dog-lover and former international traveller, and has recently embraced the opportunity to explore more of her home province of Ontario.