Car insurance

From Financial Consumer Agency of Canada

Why you need car insurance

You must have car insurance if you own a car or other vehicle.

Car insurance may protect you from:

  • having to pay to repair your car or other vehicle if it's damaged or in an accident
  • liability claims if you're held responsible for an accident causing damage to another person’s vehicle or injury to other people​

Insurance companies may refer to car insurance as property and casualty insurance. Property and casualty insurance also includes home insurance, business insurance and disaster insurance.

Who a car insurance policy covers

Reminder 

If you decide to lend your car to someone who isn't listed on your insurance policy and they have an accident, your own insurance record may be affected and your premiums may increase.

If you get into a car crash, your insurance may cover:

  • ​the driver
  • all passengers
  • other people who are involved

In some provinces, injured passengers or other people involved in the accident who have their own insurance policy must make a claim under their policy first.

The principal driver is the person who drives the car most often.

Additional drivers are other drivers in the household who may use the car as part of their routine, such as driving to school or work. Your insurance policy must list additional drivers. If additional drivers have a poor driving record, your premiums may increase.

Occasional drivers are drivers who only use the car from time to time.

What a car insurance policy covers

Coverage is the maximum amount of money the insurance company will pay you if you make a claim for a loss or an event covered by your policy.

Mandatory insurance coverage

Canadian provinces and territories require drivers to have mandatory coverage. Some provinces may require more coverage than others.

Liability insurance

Liability insurance covers losses, such as injury or death, which your vehicle causes to other people. It also covers damage your vehicle causes to other vehicles. If the cost of the losses or damage is more than your liability limit, you will need to pay the balance of the settlement yourself.

Liability insurance does not cover the cost of repairs to your own vehicle. You may need to consider additional insurance to cover these costs.

Accident benefits/bodily injury insurance

Accident benefits cover the cost of your own medical expenses and loss of income when you're in a car accident.

In Quebec, you're automatically enrolled for insurance that covers bodily injury. Premiums are paid as part of your driver’s licence registration. You don't need to buy extra coverage for this.

Additional insurance coverage

Your car insurance policy may also provide you with additional benefits.

Collision insurance

Collision insurance covers the cost of repairing or replacing your car if you hit another car or object. This is sometimes included with your mandatory insurance coverage.

Ask your insurance company what coverage your policy provides.

Comprehensive insurance

Comprehensive insurance covers the cost of repairing or replacing your car due to other types of damage or loss. This may include:

  • vandalism
  • damage to your windshield
  • theft

Comprehensive insurance doesn't cover loss or damage to your car if you hit another car or object in a collision.

Ask your insurance company what coverage your policy provides.

Optional insurance coverage

Depending on your driving record, you may not be eligible for all types of optional insurance.

You can to buy extra insurance to pay for risks not covered in your basic policy. Insurance companies call this a rider or an endorsement. You will pay extra for this.

You may also want to consider if you would need additional insurance coverage for:

  • renting a car or using alternate transportation while your car is being repaired
  • repair to physical damage to a rental car
  • emergency road-side assistance
  • collision forgiveness which keeps your premium from increasing following the first accident for which you're at fault
  • depreciation to make sure you receive the full value that you paid for your car

Ask your insurance company what your policy covers and does not cover. Ask for what risks you might need extra coverage.

What a car insurance policy does not cover

Most car insurance policies don't cover the loss of personal possessions, such when a thief steals golf clubs, clothing or personal electronics from your vehicle. Your home or tenant’s insurance usually covers these losses.

Check your home insurance policy to find out if it provides coverage for the theft of personal items from your vehicle. 

Read your car insurance policy carefully. Always make sure you understand what it does and does not cover. Keep it in a safe and accessible place. Refer to it when needed.

How an insurance company calculates premiums

Premiums are the amount you pay to buy insurance.

When determining how much you'll pay for premiums, insurance companies may consider factors such as:

  • your age
  • your gender
  • where you live
  • what car you drive
  • how much you use your car
  • your driving record
  • your claim history
  • the type of coverage you choose
  • the amount of your deductible

A deductible is the amount of your claim you agree to pay before your insurance company pays the rest.

Shop around for the lowest insurance premiums

Your premiums will vary from one insurance company to another. It's important to shop around, ask for quotes, and compare prices before deciding on one insurance company. In some cases, you may be eligible for a discount by combining your home and car insurance.

When shopping for a car, check the insurance rating for the car you're thinking of buying. Insurance companies assign ratings based on the claims made on different makes and models. Cars with better ratings are cheaper to insure. You can get rating information from:

In most provinces and territories, an insurance company can charge higher premiums based on your credit rating.

What to do if your car insurance premiums increase

In some cases, your car insurance premiums may increase.

Re-evaluate your needs

Review your insurance needs with your insurance company. You may want to consider asking about the following options for lowering your car insurance premiums:

  • raising your deductible
  • dropping collision coverage if your car has a low resale value
  • a package deal for insuring your home and car, or more than one car, with the same insurance company

Shop around

Shop around, get quotes and compare prices from different companies and brokers to make sure you're getting the best deal.

Car insurance settlement options

Your insurance company will review your claim and decide how it will settle your claim.

When you make a claim, you're always responsible for paying the deductible. How much money you get from your claim depends on your insurance benefits.

Remember that the amount of your deductible may reduce the amount you get from a claim.

Repair or replace

Your insurance company will pay for your car to be fixed or rebuilt to the same condition it was in before it got damaged.

Betterment

Your insurance company will only pay for your car to be fixed to the same condition it was in before it got damaged. If your car needs any additional repairs on things that were broken before the accident, you'll be responsible for paying the additional cost for these improvements to your car.

Write-off

Your insurance company may decide to treat your car as a write-off instead of repairing it, if the cost to fix your car is more than the value of your car before it was damaged. Your insurance company would provide you with a cash settlement based on the value of your car before it was damaged.

Settling a claim if you have a car loan

If you have a car loan, your car insurance policy will usually include a loss payee clause. A loss payee clause makes your lender your beneficiary. In case of loss or damage to your car, your insurance company will pay your lender (your beneficiary) up to the remaining balance of your car loan when you make a claim.

When you make a claim, your insurance company may, at its discretion, give the money to either:

  • you, so you can fix your car when you submit a claim
  • your lender, who would then give you the money for repairs after you submit receipts proving they were done

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