Tips For First-Time Car Insurance Buyers

Owning a car has long been associated with a sense of freedom and endless possibility. The open road has been romanticized in countless novels, songs and movies. You can almost picture yourself turning up the volume on the radio and driving off into a technicolour horizon. The credits roll.

But for all the great adventures you plan to embark on, car ownership comes with a bit of practical advice: With great driving comes great financial responsibility.

Of course, we’re talking about car insurance. Whether you’re buying your first car or your parents say that it’s time to get your own policy, finding the right car insurance might seem like a daunting task. But the journey isn’t all that bad. (What’s more, car insurance is required by law.) With a little bit of preparation, you can get a solid policy with the right coverage types for a good price.

How To Get Car Insurance for the First Time

Standard car insurance offers protection to the driver, occupants and any pedestrians involved in an accident with the vehicle. Additional coverage may cover any damage to the vehicle.

It’s smart to familiarize yourself with the types of car insurance so you know what you’re buying. While car insurance varies from province to province, there are two kinds of mandatory coverage across Canada:

  • Third-party liability insurance. This pays for damage you cause to other’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 for legal defence costs if you’re sued after an accident. Minimum coverage varies between the 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 medical costs, rehabilitation expenses and financial compensation, including income replacement, if you are injured in a collision. It also coverage funeral expenses and payments to your survivors if you are killed in an accident. This coverage is mandatory across Canada, except in Newfoundland and Labrador.

Your policy might also include the following:

  • Collision or upset coverage. This coverage pays for the cost of repairing damage to your car following a collision with another car or if you hit another object, like a guardrail.
  • Comprehensive insurance. This coverage pays for theft and damage due to fire, hail, flooding, vandalism, falling objects and animal strikes—for instance if you hit a deer.
  • Specified perils: This coverage pays for specific perils listed on your policy, including: fire, theft or attempted theft, lightning, hail, rising water, earthquake, windstorm, an explosion, riot or civil disobedience, the falling or forced landing of aircraft or part of an aircraft, and the stranding, sinking, burning, derailment or collision of any kind of transport in, or upon which, a car is being carried on land or water.
  • All perils: This is the most comprehensive (and expensive) coverage as it combines collision or upset and comprehensive coverages. It also covers loss or damage if a person who lives with you or a person who works for you steals your car.
  • Direct compensation property damage (DCPD). With DCPD coverage, your insurance company pays for repairs to your car when you are not at-fault for a collision. It’s mandatory in Nova Scotia, Ontario, New Brunswick, Newfoundland and Labrador, PEI, Quebec and Alberta.
  • Uninsured automobile: This coverage protects you (and your family) if you are injured or killed by a hit-and-run driver or an uninsured motorist. It also protects you if your are hit by an uninsured motorist while riding a bike or walking and covers damage to your vehicle caused by an identified uninsured driver.

Optional coverage (also known as endorsements or a rider) include:

  • Loss of Use coverage pays for a renewal car (or alternative forms of transportation, such as a taxi or bus fares) while your car is being repaired. In Ontario this is known as OPCF (Ontario Policy Change Form) 20 and in Alberta it’s known as SEF (Standard Endorsement Form) 20.
  • Accident Waiver/Forgiveness (OPCF 39) protects your premium from going up when you have your first at-fault collision.
  • Liability for Damage to Non-Owned Vehicles (OPCF 27 or SEF 27) extends coverage to a borrowed vehicle, whether it’s a friend’s or a rental.

It’s also a good idea to shop for car insurance before you purchase a car. Without insurance in place you may not be able to drive your new car off the dealer’s lot. You’re going to 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 your loan payment and vehicle maintenance expenses. While many factors influence what you’ll pay for insurance, the type of vehicle you drive plays a role, so it’s good to have an idea of the most and least expensive cars to insure before you close the deal.

The Canadian Loss Experience Automobile Rating (CLEAR) assesses how likely it is that a specific vehicle will be involved in a claim and for how much. Using that data, the Insurance Bureau of Canada publishes an annual edition of “How Cars Measure Up” that analyzes statistics on the number and cost of collision, comprehensive, DCPD and accidents benefits claims for the most popular vehicle models in Canada.

Here’s what you need to know:

  • Have a make and model in mind. In the process of car shopping, you’ve most likely identified what types of cars you’re interested in. For example, you want a brand new Toyota Camry or you’re interested in test driving a used Honda Civic. An insurance agent can give you quotes for a few models, so you can budget accordingly.
  • Understand what coverage types you’ll need. Each province has its own mandatory insurance requirements, but you can also chose a higher coverage or additional endorsements. And if you’re taking out a car loan or lease, your lender or leasing agent will most likely require collision and comprehensive insurance.
  • Compare quotes from multiple car insurance companies. An independent insurance agent or online car insurance comparison website is an efficient way to price shop. Rates vary considerably among insurers, so you want more than one or two quotes. Be sure to compare quotes for the exact same coverage level to get an apples-to-apples comparison.

Then you can ask your insurance agent to set up a policy. If you have the car picked out and know the vehicle identification number (VIN), this part is a breeze. You can have your policy ready to go before you arrive at the dealership. If you don’t have the VIN yet, ask if the agent can set up a policy with the information you have, like the drivers in your household and the address where you’ll garage the vehicle. Once you decide on the car, call the agent with the VIN to complete the purchase of the car insurance policy.

What Information Do I Need?

Before you buy a car insurance policy, you will need to gather some personal information for you and any other drivers who will be listed on the policy, including:

  • Driver’s licence numbers for all drivers on the policy.
  • Date of birth for all drivers on the policy.
  • Garaging address of the car (usually your home address), but your insurer may ask whether it’s a private driveway, garage, etc.
  • Vehicle identification number (VIN) for all vehicles you’re insuring.
  • Driving courses you or any drivers on the policy have completed.
  • Grades for student drivers (good grades, typically above 80%, might earn a discount.
  • An idea of how much car insurance coverage you want.

You Will Pay More For Car Insurance As a First-Time Buyer

If you’re a new driver and/or buying your first car insurance policy, you can expect to pay more than an experienced driver who has had insurance for several years. That’s because car insurance companies take a look at driving history and insurance history when setting auto insurance rates. The less driving experience you have, the more likely you are to file a car insurance claim.

Besides your driving record, other pricing factors insurance companies look at usually include:

  • What car you drive (make, model and year)
  • Age
  • Gender
  • Postal code
  • Annual kilometres
  • Daily commute
  • Your level of driver’s license (G1, G2, G)

And if you have your heart set on that candy apple red car, go for it. The colour of your car has no impact on your insurance rates.

How Much Is Car Insurance?

Canada offers both public and private car insurance. Drivers in British Columbia, Saskatchewan and Manitoba must buy public or government-funded insurance (though supplemental coverage may be sourced from private insurers), while drivers in Ontario, Alberta, New Brunswick, Newfoundland, Nova Scotia and PEI have access to private insurance. Quebec offers a hybrid of both.

Car insurance rates vary between provinces and even between drivers within the same city, so not all 40-year-old women driving a Toyota RAV4 in Toronto pay the same insurance rate. That’s because rates are set using a variety of very individual data points, factored against the perceived risk of each driver.

According to February 2023 data sourced from the Insurance Bureau of Canada, the average annual insurance premium for drivers in PEI was $950, while drivers in Ontario paid whopping $1,761.

What’s the Best Way to Save Money When I Buy Car Insurance?

Here are ways a first-time car insurance buyer can save money:

  • Shop around. The best way to save money is to compare car insurance quotes from multiple companies. Car insurance rates can vary drastically from one insurer to the next. You can get free quotes online or by working with a car insurance agent. Independent insurance agents can give you quotes from multiple companies to save you time.
  • Get the right amount of coverage. You’ll want to know how much car insurance you need, and an insurance agent can help you decide on coverage limits. While you don’t want to be underinsured, you don’t want to pay for more coverage than is necessary.
  • Ask for discounts. There are more than a dozen common car insurance discounts, such as multi-policy discounts, winter tire discounts and defensive driver discounts.
  • Choose higher deductibles. Your deductible is the amount of money required to pay out of pocket. So if you choose to get comprehensive coverage, you could save more each month by choosing a $1,000 deductible over a $500 one.

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About the Author: Sazzamul Ahmed