Wondering how to get the best car insurance in Canada? It’s tricky, as auto insurance rules vary from province to province, so that some auto coverages are mandatory and others optional. Add on the many factors influencing the premiums drivers pay, and there is no single best policy for Canadians. That said, you can find the best policy for you. Whether it’s you or a family member getting behind the wheel, this guide will walk you through the most commonly asked questions about car insurance, from what it covers to how to get a competitive rate.
What is car insurance?
First, let’s define what it is. Car insurance is a contract between a driver and an auto insurance provider. As with other types of insurance, such as home insurance and life insurance, an auto insurance policyholder agrees to pay a set amount (called a premium) in exchange for the ability to be compensated by the insurer for certain damages or losses covered in their policy. The insurance provider then will cover approved claims that would otherwise be difficult for you to pay for, such as a crash resulting in $1 million in damages to another driver and their vehicle. Some companies allow you to pay your insurance premiums in full for the year, which can save you money compared to paying on a monthly basis.
Many insurance policies include a deductible, which is the portion of a claim paid for by the policyholder. Agreeing to pay a higher deductible can mean having to pay lower premiums on your car insurance policy.
Is car insurance mandatory in Canada?
In Canada, auto insurance is legally required for all drivers, regardless of age or experience. People who drive without a valid car insurance can face hefty fines. They also risk losing their savings or other assets if they are involved in (let alone at fault for) an accident and are forced to pay for the damages out of pocket.
By law, every province and territory requires drivers to carry some form of auto insurance. But the types and minimum amounts of mandatory coverage (and the general cost of auto insurance) vary, depending on where you live.
What does car insurance cover?
A car insurance policy can offer coverage for many different types of claims. These include instances in which you have caused damage to another person’s property or injured yourself, other drivers, passengers or pedestrians.
In Canada, some auto insurance coverages are mandatory, while others are optional. Since auto insurance is regulated by the provinces and territories, you should always confirm what is legally required in your area. But, with few exceptions, all auto insurance policies must contain the following coverages:
- Accident benefits: Includes coverage for injuries sustained in a collision. This includes medical care, rehabilitation and income replacement (if you or the other person is unable to work) for drivers, passengers and pedestrians involved in the collision. Accident benefits also cover funeral expenses and survivor benefits, if someone is killed in the accident. This type of coverage is mandatory in all provinces, except Newfoundland and Labrador.
- Third-party liability: Provides compensation for drivers if they’re at fault in an accident and the other party is hurt or killed. It also covers damages to the other person’s property and related repair costs.
- Uninsured auto insurance: Offers coverage for injuries and damages sustained through the fault of a driver who is uninsured or unable to be identified (in the case of hit-and-runs). Uninsured motorist coverage allows you to receive money that would have otherwise legally been recovered from the other driver’s insurance policy.
- Direct compensation property damage (DCPD): In provinces with a no-fault insurance system (i.e. Alberta, New Brunswick, Newfoundland and Labrador, Ontario, Prince Edward Island and Quebec), DCPD means drivers deal with their own insurer to repair their vehicle and other damaged property, as opposed to seeking compensation from the other driver’s insurance company (when the other person is at fault). If you’re not at fault for an accident in a province without DCPD, you will have to seek property damage compensation from the other party’s insurance company.
Common coverage add-ons
The mandatory components of your auto insurance policy work together to offer financial protection against some of the most common and the most expensive claims.
However, these don’t cover damages to your own vehicle. For that, you will need to purchase optional coverages. The following two types of coverage are recommended as endorsements. In Saskatchewan and Manitoba, they are both mandatory.
- Collision insurance: Covers the costs related to the repair or replacement of your vehicle if you are at fault for a collision with another car or an object, such as a tree or pothole. Many drivers opt in for collision due to the variable Canadian weather, road conditions, traffic and other causes of unexpected accidents.
- Comprehensive coverage: Covers repairs to or replacement of a vehicle that has been damaged by something other than a collision. This can include a fire, theft, vandalism or a wind or hail storm—basically, factors that are often considered outside of your control.
Does car insurance cover theft?
Standard car insurance policies do not include coverage against theft. However, if your car is stolen, you may be insured if you have a comprehensive policy (see above), or if theft is listed as a specified peril in your policy. Specified perils coverage includes protection for the specific hazards listed in your policy, which can include theft, as well as hail, fire and windstorm damage. Opting for this additional coverage will cost you more. Note that specified perils is different from all-perils insurance, which includes both collision and comprehensive coverage.
Does my insurance cover rental cars?
Many auto insurance companies provide optional coverage for damage to “non-owned” vehicles. This coverage typically costs between $30 to $35 annually, according to the Canadian Automobile Association (CAA), and can be added to your existing policy. It only covers damage to rental cars in Canada and the United States, not all international destinations.
If your auto policy does not come with this coverage, you can opt for a collision damage waiver from the car rental company. The waiver shifts the responsibility for any damage or loss to the rental company (with some exceptions) and comes at an additional daily cost of around $25 to $27, according to the CAA.
Before purchasing additional coverage, check if your credit card offers collision coverage for rental cars. Some credit cards come with this added protection, subject to some limitations and conditions.
How much car insurance do you need?
What are the best car insurance coverage amounts? The answer to this question will vary from one person to the next, as it ultimately depends on your ability or willingness to cover damages out of pocket, should you get into an accident.
For example, uninsured auto insurance typically provides up to $200,000 in property damage and injury coverage. However, in some provinces, you can increase this amount. However, since a single accident can easily exceed the minimum coverage, many drivers choose to pay for $1 million to $5 million in coverage. Car insurance coverage amounts aren’t entirely up to you, though. Depending on where you live, you will have to have a minimum amount of coverage.
For example, in most Canadian provinces, you are required to have $200,000 in third-party liability coverage. (In Quebec, the minimum is $50,000, and in Nova Scotia, it is $500,000). Remember: As the driver, you are responsible for paying for any damages that go beyond what is included in your policy.
Receiving more coverage means you will have to pay more in premiums.
How much does car insurance cost in Canada?
The amount you will pay in auto insurance premiums is based on a host of factors. Here’s a sample of some of the most important ones:
- The driver’s profile: New drivers—especially those under the age of 25—tend to pay higher premiums, because the data suggests they are at a great risk of getting into accidents. Similarly, male drivers are statistically more likely to get into an accident causing death, which is factored into premiums.
- The vehicle: Insurance companies consider how expensive your car would be to fix if you get into an accident, as well as how likely it is to be stolen. They use a system called the Canadian Loss Experience Automobile Rating (CLEAR), which rates different aspects of a vehicle model, helping them understand just how risky your vehicle is to insure.
- Where you live: Premiums vary widely by province, the difference being that some provinces offer public, government-run insurance programs, and others operate on a private (or a hybrid public-private) model. Even within a single province, costs can be higher if you live in a densely populated area, as opposed to a rural region where there are fewer accidents.
- Driving history: Insurance will be more expensive if you have a history of traffic tickets or car accidents.
While an insurance broker can give you more accurate numbers for you and your particular driving situation, the General Insurance Statistical Agency has looked at the average premiums across 10 provinces. On average, Canadian drivers spend $1,142 per year on car insurance. Drivers pay the most in British Columbia (where the average cost is $1,832 per year) and the least in Quebec ($717 per year). Here’s what you may expect to pay, based on the province you live in:
|Province||Average of cost of car insurance|
|Newfoundland and Labrador||$1,168|
|Prince Edward Island||$816|
The cost of insuring an electric vehicle
Electric vehicles (EVs) have become more popular in recent years. Still, few EV models have been rated using the industry’s CLEAR system, which means there isn’t enough data available to know whether EVs are more or less expensive to insure, as a rule. However, industry experts say your vehicle’s power source is less important than the costs of repairs, and EVs remain fairly expensive compared to gas-powered vehicles. That can lead to paying higher premiums for EVs.
Auto insurance for high-risk drivers
Private insurers may be reluctant to offer insurance to high-risk drivers, such as those that have been convicted of impaired driving. However, since auto insurance is mandatory in Canada, all licenced drivers are guaranteed coverage no matter where they live.
It may not be easy to find affordable car insurance after a DUI, but you will find coverage. Quebec, Manitoba, Saskatchewan and British Columbia have government-run insurance plans that include options for high-risk drivers. In other provinces with private insurers, high-risk drivers can work with the Facility Association, a non-profit organization that ensures the availability of car insurance to all eligible drivers, to obtain coverage.
How to find the best car insurance in Canada
Given the complexity of auto insurance and the number of variables that determine what you will pay in premiums—including where you live, the amount of coverage you need and your driving record—there isn’t a straightforward answer to the question, “Which company has the best car insurance in Canada?”
However, there are a few steps any driver can take to feel confident that they’re getting the right amount of coverage at a competitive rate.
First, start by understanding the different components of an auto insurance policy. This guide should hopefully be a useful starting point. You may also want to consult the Insurance Bureau of Canada (IBC) for general information on the car insurance rules specific to your province.
Then, shop around for the best car insurance rates. You can start by getting a quote from your bank, an insurance broker or where you get your home or life insurance; however, you should also compare rates online before you buy auto insurance.
Compare the various products and premiums available until you feel confident about your choice. One way to do this is to use an online aggregator site, which pulls rates from various providers—similar to working with an insurance broker. (Note: MoneySense.ca is owned by Ratehub Inc., which also owns the aggregator site Ratehub.ca.)
How to compare auto insurance quotes
In order to obtain a car insurance quote, you’ll be asked to provide information about a few things, including the vehicle requiring coverage, the drivers you want to insure and the amount of insurance coverage you want. You’ll have to share valid driver’s license information and the details of your existing insurance provider and policy (if you have one). You may also be asked to provide information about previous traffic violations and insurance claims, if you have any.
The insurance provider will then give you a quote for the policy. You may be tempted to run with the company offering you the cheapest auto insurance quote, but you should always carefully compare multiple rates and policy details before making a final decision.
To make a fair assessment, you’ll want to look at:
- The details on your policy. Make sure your personal details, coverage needs and driving record are all accurately reflected in the agreement.
- The coverages and deductibles included in the policy. The lowest rate you’ve seen may also offer the least amount of coverage and the largest deductible.
- Your payment and bundling options. Do you have a home insurance policy that can be bundled with auto? Do you have the option of paying your premiums annually instead of monthly? Both of these can save you money.
Ready, set, drive
No matter how you look at it, auto insurance is a significant expense. And given that it’s a legal requirement, it’s an unavoidable cost of owning and driving a car in Canada. Still, the price of car insurance pales in comparison to what a driver faces without it: significant fines, or getting into an accident without being able to pay for the associated medical bills or repairs. To get the most value out of car insurance, understand the coverages you need—and those you don’t, or need less of—and always do your research before buying an auto insurance policy.