Car insurance (a.k.a. auto insurance or vehicle insurance) is a mandatory form of insurance in Canada. Car insurance protects drivers, passengers, and pedestrians from financial loss relating to vehicles on the road.
But car insurance is complex. There’s a wide range of products available, and it works differently in each province.
Here’s your guide to the basics of car insurance.
Car insurance covers many costs associated with vehicle accidents and other incidents. This includes:
Not all of these coverages exist on every car insurance policy. For example, insuring damage to the vehicle itself is often optional (though highly recommended).
There are many types of car insurance coverage, but they generally fall within three categories: physical damage, liability, and accident benefits.
Within physical damage coverage, the main two types you’ll see are collision coverage and comprehensive coverage. Collision protects the insured vehicle from damage sustained in collisions, while comprehensive coverage protects it from damage sustained elsewhere.
However, the most essential coverage on a car insurance policy is liability coverage. Liability is the term for when you’re legally deemed responsible for something. Car liability insurance helps cover legal costs and damages after an accident for which you’re responsible. For example, if you rear-end another vehicle at a stop sign, it’s your liability coverage that would pay for repairs to the other vehicle.
Finally, there are accident benefits coverages. These vary in nature, but generally pay medical and rehabilitation costs for anyone injured in a vehicle accident. They also often include loss of income benefits for those who can’t work following an accident.
It’s important to note that, when you buy personal car insurance, it doesn’t typically cover business use of the vehicle. If you use your car for business activities (including ridesharing or food delivery), you’ll need to speak with your insurance provider to make sure you have appropriate coverage.
When you buy a car insurance policy, you pay a premium in exchange for the coverage. The amount you pay depends on many factors, the largest of which is the insurance company’s expected claims costs for the upcoming year. Since everyone’s premiums are pooled to pay for claims, higher claims costs mean higher premiums.
The other factors that influence car insurance premiums are details about the vehicle and driver, as well as the coverage selected. For example, drivers with great driving records are theoretically less likely to be involved in an accident, so there’s usually a discount for clean driving histories. Similarly, vehicles that commute to work every day usually cost more to insure than vehicles that only leave home on the weekend (known as pleasure use).
When you apply for car insurance, the insurance provider will ask for information about the vehicle and how it’s used before they determine how much it will cost to insure.
At that point, you’ll be able to choose coverage limits and optional coverages. These will also affect the price you’ll pay for the policy.
You’ll usually be able to choose a deductible, too. The deductible is the amount of money you’ll pay when you make a claim, before the insurer covers the remainder. Depending on the provider from whom you’re buying, you can choose deductibles ranging from about $250 through $2,000—or more. You will often have separate deductibles for different policy coverages, like a collision deductible and a comprehensive deductible.
When you choose a low deductible, your premiums will be higher, but you’ll have a smaller amount to pay if you make a claim. Conversely, if you choose a high deductible, you’ll pay less for your policy, but pay more if you make a claim.
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Given that there are some 33 million registered vehicles in Canada, finding a car insurance policy isn’t hard.
Almost anywhere you go, you’re not far from a car insurance broker’s office. It’s increasingly common to buy your car insurance online, too. Many Canadians insure their vehicles and their home with the same insurance provider. They often get a bundle discount for doing so, like saving up to 5% on your car insurance when you get both home and car insurance from Square One.
In some provinces, you’ll buy your policy from the province’s public car insurer. This is the case in BC, Manitoba, and Saskatchewan. Quebec has a hybrid system, wherein everyone has coverage for personal injuries under a public system, but drivers still need to buy private insurance to cover their personal liability and their vehicle.
In every other province, drivers can only buy car insurance from private insurers.
When you’re ready to buy your car insurance policy, whether online or in person, there are just a few things your potential insurer will need from you:
Assuming the insurance provider approves your application, you can make a few decisions about the coverage you want to buy. That includes adding optional coverages, and choosing limits and deductibles.
Car insurance is mandatory for all drivers in all provinces and territories. However, the precise coverages that are mandatory vary. Liability coverage is mandatory everywhere; drivers must have at least $50,000 in third-party liability in Quebec, $500,000 in Nova Scotia, and $200,000 everywhere else.
Accident benefits are also mandatory across the country.
Collision, comprehensive, and other coverages are optional in many provinces, but not all. For example, they are mandatory in Saskatchewan and Manitoba, and for any Canadian leasing or financing their vehicle.
Car insurance costs vary widely between provinces, and depending on the vehicle, driver, and selected coverages. Average annual premiums in 2020 ranged from $1,832 in BC to $717 in Quebec.
Car insurance doesn’t cover damage from wear and tear or mechanical breakdown. It also typically won’t respond if the driver of the vehicle was under the influence of drugs or alcohol during an incident, or is convicted of a criminal offense related to the incident (like failing to stop at the scene of an accident).
And finally, car insurance typically does not cover personal possessions inside your vehicle. For example, if your laptop or snowboard is stolen from your car, your car insurance would not respond. Personal possessions are covered under your home insurance policy.
Want to learn more? Visit our Car insurance resource centre for dozens of helpful articles to guide you through the complexities of car insurance. Or, get an online quote in under 5 minutes and find out how affordable personalized car insurance can be.
About the expert: Daniel Mirkovic
A co-founder of Square One with 25 years of experience in the insurance industry, Daniel was previously vice president of the insurance and travel divisions at the British Columbia Automobile Association. Daniel has a bachelor of commerce and a Master of Business Administration (MBA) from the Sauder School of Business at the University of British Columbia. He holds a Canadian Accredited Insurance Broker (CAIB) designation and a general insurance license level 3 in BC, Alberta, Saskatchewan, Manitoba and Ontario.
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