How Car Insurance Works in Canada: Complete Guide

Canada is a large country and in order to get from one place to another, most people use their cars either to complete their daily tasks or go on trips. In fact, according to research, more than 80% of Canadians have reported that they own or lease a vehicle and it would be impossible not to have one to get around.

As a result, there is an increased risk of drivers getting into car accidents and sustaining damages and injuries. These consequences can lead to high repair costs and expensive medical bills, which is why people are required by law to have car insurance to help them cover their expenses.

In general, the main purpose of auto insurance is to provide drivers with financial and legal protection against losses, damages, and injuries sustained in an accident. However, for many Canadians, car insurance can be a tricky thing, especially if you are completely new to it. To help you understand better, here is our ultimate guide elaborating on everything you need to know about car insurance in Canada.

Complete Guide

The cost of car insurance in Canada

When it comes to determining the cost of car insurance in Canada, insurance companies take several factors into consideration. These include:

  • Age and gender;
  • Location;
  • Vehicle make, model, and year;
  • Driving history and record;
  • Type of coverage on the policy;
  • Past claims;
  • Deductible amount.

This simply means that there is no car insurance policy that fits all drivers. However, it is important that you shop around for multiple insurance companies to compare quotes and choose the one that suits you best.

If you need assistance, you should consult with an insurance broker to help you along. For example, if you live in the capital city of Ontario, get in touch with professional advisors to help you search the market for the best car insurance quotes Toronto has to offer that fit your budget, needs, and current circumstances.

Types of car insurance coverages

Although each Canadian province has its own rules and regulations regarding car insurance, there are a few mandatory coverages all drivers need to have, and other optional ones that could also come in handy.

The three types of car insurance coverage every new and experienced driver must obtain are third-liability, uninsured auto, and accident benefits coverage. To enhance their coverage, car owners may purchase collision and comprehensive coverage, accident forgiveness coverage, and waiver of depreciation, all of which are optional. 

For instance, liability coverage is probably the most important type of car insurance. Its main purpose is to cover all losses, damages, and injuries you cause to other vehicles, passengers, and properties following an accident. 

As for the optional car insurance coverages, most Canadians obtain collision and comprehensive coverages. Collision coverage typically covers the costs for vehicle damages if you hit another car or object, whereas comprehensive coverage pays for damages sustained outside of a car accident such as theft, fire, or vandalism.

Ways to save on car insurance

There is no going around it—purchasing car insurance can be expensive. The good news is there are several ways you can lower your premium while still reaping all the benefits auto insurance provides. Some of these include:

  • Paying annually; 
  • Increasing your deductible; 
  • Bundling insurance together;
  • Improving your driving habits;
  • Installing anti-theft devices; 
  • Getting winter tires;
  • Going hybrid or electric.

Out of all options available, most drivers choose to increase their deductible to reduce their premium. The deductible is the amount you pay out-of-pocket for losses and damages before your car insurance kicks in following an accident. The higher it is, the lower your premium will be. However, make sure you choose a deductible you can afford because otherwise, you may not be able to begin repairs right away. 

What to do if your car insurance premium increases?

In some cases, car insurance premiums may increase due to a variety of reasons. If this happens, you should re-evaluate your needs and consult with your insurance provider to give you options on how to lower your premiums. 

Don’t forget to shop around for different insurance companies to get new quotes and compare prices so you can ensure you are getting the best deal.

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Final thoughts

All Canadian drivers must have car insurance. There are several types of insurance coverage they can choose from, each serving a different purpose and offering various benefits. If you are a new driver in Canada, be sure to refer to our post and learn everything you need to know about car insurance. 

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