What You Should Know Before You Choose Auto Insurance in Canada


You’ve spent days researching and you think you’ve finally found the perfect car for you. You’re ready to drive it off the lot and into freedom. There’s just one slight snag: You can’t drive your dreamcar anywhere, because you don’t have auto insurance.

Auto insurance is one of those pesky financial necessities in life. Although most of us don’t enjoy shopping or paying for it, you’ll be very glad you did if you’re ever involved in a collision.

This article is a primer on everything you should know before you choose auto insurance in Canada. We’ll take a look at the different types of auto insurance available, factors that influence premium costs, and the important details you should consider before you buy.

Who Needs Auto Insurance?

Simply put, if you’re a motorist in Canada, you’re required to have auto insurance, and skimping out on it can lead to a major fine. Ontarians caught without auto insurance, for example, are looking at a fine between $5,000 and $50,000 for a single offense, and could also have their driver’s licence suspended and car impounded.

But that’s not all. Anyone found to be driving without valid auto insurance could be considered a high-risk driver, and as a result might face higher auto insurance premiums from insurance companies, or in some cases, might be refused auto insurance outright in the future. If an uninsured driver is involved in a collision and found at fault for an accident causing injury or death, they could be found personally responsible for the injured party’s medical costs and any other losses.

What Types of Auto Insurance Exist in Canada?

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The minimum level of auto insurance required in Canada varies provincially, and it’s important to familiarize yourself with your province or territory’s requirements to ensure you comply.

The most basic type of auto insurance is third-party liability coverage. Third-party liability coverage protects you, the policyholder, against paying for damage you cause to someone’s property. It also protects you if someone else is killed or injured as a result of an at-fault car accident committed by you. The minimum coverage varies by province, but at the very least it should cover the medical costs of anyone injured in an accident. Third-party liability coverage is mandatory in Canada.

The second type of insurance is collision coverage. In addition to protecting you from third-party liabilities, collision coverage also covers you if you hit something other than a vehicle, such as an embankment or guardrail. It’s fairly common for this policy to also protect you if you’re involved in an accident with a motorist who isn’t insured. This broader level of coverage typically costs more than liability.

The third type of auto insurance is comprehensive coverage. As its name suggests, comprehensive provides the broadest range of protection. Not only does it usually cover medical and collision-related damages, but it may also protect you in the event of theft and floods. But that comes at a cost, as comprehensive premiums are usually the highest among the three.

Two other optional types of auto insurance you might consider signing up for are specified perils and all perils. As its name implies, specified perils protects you against specific damage to your vehicle like theft or attempted theft, and weather-related damage, such as fire, lightning, windstorms and earthquakes. All perils combines the protection you receive under collision and comprehensive coverage.

It’s important to weigh the amount of coverage you need with the premium you’ll pay in order to find the auto insurance coverage that’s right for you. A lot of us like to shop for the auto insurance with the lowest premiums, but as the old saying goes, you get what you pay for. When shopping around, it’s important to also look at the amount of coverage you’ll receive to ensure it’s sufficient. The last thing you want is to end up paying a lot of money out of pocket if you ever need to file a claim.

What Factors Influence the Cost of Auto Insurance?

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If you’re anything like me, you may have a tendency to complain that your auto insurance premiums are too high. But your premium might make more sense if you understand how it’s calculated. Insurance companies set auto premiums based on a number of factors including your vehicle’s make and model, your driving history, your age, and gender.

A vehicle’s make, model and production year has major bearing in premium costs. For example, sports cars are typically more expensive to insure compared to sedans. This boils down to two factors: sports cars not only tend to have a higher retail price, but they’re also more likely to be involved in a collision.

Your driving history is another big factor. If you’re a very safe driver who’s never received as much as a speeding ticket, you could save thousands of dollars in auto insurance premiums versus someone who has several speeding tickets and has been involved in collisions.

Incurring demerit points for driving infractions, such as dooring a cyclist and speeding, can impact the auto insurance premiums you’ll pay as well. Demerit points won’t affect your auto insurance premiums immediately, but they will when the policy comes up for renewal, as long as your insurance company checks your driving record.

A lot of motorists aren’t aware that their place of residence can have a big impact on their auto insurance premiums. Some neighbourhoods have a history of filing more car insurance claims than others. If your area has a lot of break-ins and collisions, be prepared to pay to for it. Although I’m not saying that auto insurance premiums should motivate you to move, it’s certainly something to be cognizant of.

Two more factors that influence car insurance premiums are the policyholder’s age and gender. Insurance is one of the few industries where companies can legally discriminate based on age and gender in pricing. All things considered equal, you’ll generally pay less for auto insurance the older you are. (At least until you hit your golden years, when you’ll be forced to fork over more for premiums.) Men generally pay higher auto insurance premiums than women, as men are known for exhibiting riskier driving behavior.

How Can Drivers Minimize What They Pay in Auto Insurance?

Who isn’t looking to pay less for your auto insurance? Here are some simple ways to cut down on what you pay and free up room in your monthly budget for savings or investing.

Bundle and save. Are you a homeowner? By bundling your home and auto insurance with the same insurance company, you can expect to receive a discount off both.

Raise your deductible. Your deductible is the amount that you’re required to pay out of pocket before your insurance company will chip in in the event of a claim. By choosing a higher deductible, you could save a substantial amount on your monthly premiums. Inquire with your insurance company and check out the deductible options you can choose.

Shop around and save. Many of us have our auto insurance on auto pilot; we’re too busy to allocate time toward shopping around and simply renew with our existing insurance company. While that may be convenient, it’s not necessarily cost effective. By shopping around, you’ll have the peace of mind that you’re getting a good rate and adequate coverage.

Where/How Can Drivers Purchase Auto Insurance?

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You can buy auto insurance from a licensed insurance broker, which is someone who offers insurance for a number of different insurance companies. The broker will research the market for you to find the insurance company with the coverage you’re looking for at the best rate.

Another choice is to use an insurance agent. An insurance agent typically represents a single insurance company, so after consulting an insurance agent it might still be a good idea to do your own additional research into possible alternatives to what the agent suggests. Similar to insurance agents are direct writers, who work for insurance companies that sell directly to consumers.

A third choice is to shop online on your own behalf. The upside to this is that you feel like you’re in the driver’s seat. The downside is that insurance can be complicated, so you’ll probably want to speak to a human being at some point.