Auto Insurance 101 | New To Canada
What is insurance?
Insurance is a means of protection from financial loss. Mandatory auto insurance coverage provides protection to the automobile driver, occupants in the vehicle, property belonging to others, as well as to pedestrians that may be involved with the accident. Optional coverages are also available to cover damage to the vehicle in the event of a claim.
Insurance is a contract between an Insurance Company and you—the policyholder. In exchange for premiums paid by the policyholder, the Insurance Company will pay for claims that occur, provided that the event is covered by your policy.
Do I really need auto insurance?
The answer is YES. It is required by law, no matter what region of Canada you live in. You are not authorized to drive without it.
In some provinces you will not be able to obtain your vehicle registration unless you provide proof of insurance.
How are auto insurance premiums calculated?
In order to set a premium to insure your vehicle, insurance companies consider many factors including:
- The vehicle year, make, and model
- Where you live
- The use and approximate number of kilometers you drive your vehicle annually
- The age and driving experience of each driver in the household
- The claims and collision history for each driver
- Each driver’s conviction record for last three years
- The specific coverages on your vehicle
Third party liability Provides coverage for injuries or damages that you may cause while driving. In most provinces, under certain circumstances, the person who did not cause the collision has the right to sue the at-fault driver for costs and damages not covered by accident benefits.
Accident benefits Includes coverage for medical treatment, income replacement and other benefits, to help you recover if you are injured in a collision. This coverage also provides funeral expenses and payments to your survivors if you are killed in a collision; mandatory in every province, with the exception of Newfoundland and Labrador.
Uninsured automobile Provides you with coverage if you are injured or killed by an uninsured motorist or hit-and-run driver, to the extent that you were not at fault; covers damage to your automobile caused by an identified uninsured motorist.
Collision Pays for the cost of repairing your car following a collision with another vehicle, or an object such as a tree, animal, guardrail or pothole.
Comprehensive Insures against loss or damage to your car resulting from miscellaneous causes, including fire, theft, windstorm, hail, rising water, malicious mischief, riot or civil commotion, explosion, earthquake, falling or flying objects, vandalism, missiles, etc., but normally not including loss by collision or upset.
You may purchase optional insurance, known as “endorsements”, including the following types of coverage:
Family protection coverage Pays for injuries to you and your family from the actions of an at-fault, under-insured driver. If you are travelling in a province where the mandatory liability coverage is low, this coverage ensures that you and your family are covered to your own policy’s limits, regardless of the other person’s coverage levels.
Loss of use Pays for a rental car or alternate transportation, such as taxi or train fare, while your car is being repaired following an insured loss.
Coverage for physical damage to a rental car Provides you with collision and comprehensive coverage, which is particularly useful for drivers who frequently rent cars in Canada and the United States.
Depreciation waiver coverage Ensures you receive the full value that you paid for your car—without depreciation—and is specifically designed for new cars.
What is a deductible?
A deductible is the amount you are responsible to pay in the event of a claim. Most claims are subject to a deductible. Deductibles can range anywhere from $300 up to $5,000. A higher deductible will decrease your premium, but also results in you having to pay more in the event of a claim.
Both collision and comprehensive coverages have deductibles.
Factors that may reduce your premiums
Letter of experience If you purchased insurance in another country, it is to your advantage to obtain a letter of experience (in English), from that country. Proof of previous insurance from another country can help lower your premium in some instances. If you have proof of three years of experience with no claims, you may qualify for a better driving record.
Driver education course Completing a driver education course can help improve your driving and lower your cost of insurance. Beginner driving schools are regulated. Look for schools that are ministry approved, beginner driver education courses. Once completed, you must obtain a driver’s abstract from the ministry showing it has been completed. This will allow a driving record equivalent to three years of driving experience.
Telematics Telematics is a program designed to reward good driving behaviours. A small device is plugged into your car and records your driving behaviour. Results are based on three factors: hard braking, rapid acceleration, and time of day the vehicle is driven.
Higher deductibles Opt for higher deductibles for claims relating to your car. The higher the deductible (or greater amount you pay in a claim), the lower your premium will be.
Multi policy discount You can save 10% off of your auto insurance premium by insuring your tenants, home, or condominium, with the same company.
Winter tire discount If your vehicle is equipped with four winter tires from October to April, you may be eligible of a discount of up to 5% off of your auto insurance premium.