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.