How Car Insurance Works in Canada: Your Complete Guide

Here’s the skinny, car insurance is not the same across Canada. Many provinces have very different regulations about how you insure your car, motorcycle, snowmobile, moped, farm equipment, and flying skateboard. I’ll try to offer some helpful information on navigating this world of insurance laws, provincial bodies, and private companies. If you own a vehicle, you need to insure it. So, you might as well be as prepared as you can be whether you’re buying for your first vehicle or your tenth.

What exactly is vehicle or car insurance?

Car insurance is basically a contract between you and the insurance agency. You pay them to protect you and your car. Car insurance is 100% mandatory in all of Canada.

Why do I need car insurance in Canada?

It’s illegal not to buy car insurance in Canada, and it makes sense. Protecting people and their property when car accidents happen, determining fault, assessing liability, and enforcing fines and penalties likely wouldn’t happen without this law.

Most provinces have different consequences for people who drive while uninsured. Quebec car owners must buy insurance from a private insurance company and through Société de l’assurance automobile du Québec (SAAQ). Getting caught with no insurance could lead to a fine of a few hundred dollars, and, should you cause an accident while uninsured you might lose your license entirely.

In Ontario, there are big fines for driving without car insurance. You can only buy insurance through a private insurance company. The first time you get caught, you might pay a fine ranging from $5,000 to $25,000. The next time, the fines start at $10,000 and your license could be suspended for up to one year.

Manitoba’s car insurance penalties are similar to those in Ontario, a potential fine between $5,000 and $25,000 and a license suspension for driving while uninsured. Manitobans buy their primary car insurance from a provincial body called Manitoba Public Insurance (MPI).  They have the option to purchase additional coverage from private companies.

What types of insurance must I buy in Ontario?

There are four different insurance products required in Ontario. Liability insurance, statutory accident benefits coverage, uninsured automobile insurance, and direct compensation property damage (DCPD) insurance. These four provide a shield against various types of accidents. Different provinces require more types of coverage while others require fewer.

Liability Insurance offers protection for the driver where they are at fault in an accident and the other driver or passenger is hurt or killed.

Statutory Accident Benefits Coverage is a way for a person injured in an accident, whether or not it was their fault, to access medical benefits, rehabilitation benefits, income replacement, and other assistance. It affords them time to recover with less financial pressure.

Uninsured Automobile Insurance is coverage against accidents with uninsured drivers. Despite car insurance being mandatory across Canada, it’s possible to get into an accident with someone without car insurance. The minimum limit is $200,000, but you can increase that limit for an extra charge.

Direct Compensation Property Damage (DCPD) Insurance compensates you when you are injured or your car is damaged because of an accident where you were not at fault. It is also a safeguard against drawn-out accident investigations by the other driver’s insurer. With DCPD, your claim is paid out by your own insurance company.

What types of vehicles need to be insured in Canada?

Essentially, if it has at least two wheels and a motor, such as gas, diesel, or electric, it needs to be insured. This includes cars, trucks, vans, semi-trucks, heavy-duty vehicles, farm vehicles including trailers, all-terrain vehicles (ATVs) or all-terrain cycles (ATC’s), mopeds, dirt bikes, motorcycles, mini bikes, motorhomes, snow vehicles, trailers, and buses.

It’s a pretty exhaustive list, but it doesn’t include e-bikes. Good news for you e-cyclists! Even though you don’t need insurance on your e-bike, you might want to get a little coverage anyway. E-bikes can be expensive and accidents are possible while driving on the road with other vehicles. So, purchasing insurance to repair or replace your e-bike and protect you from paying damages if you’re involved in an accident may be a wise decision.

How to choose the best vehicle insurance provider in Ontario and Quebec?

Car insurance may be a mandatory purchase in Canada, but that doesn’t mean the basic coverage will always be enough if you are involved in a serious accident. If you want to be sure that you can maintain your standard of living after an accident, you’ll have to consider additional insurance.

The mandatory amount of third-party liability (TPL) insurance in Ontario is $200,000 and $50,000 in Quebec. This means that your insurance company will only pay up to the TPL limit, and you’ll be responsible for the rest. A serious accident can easily disrupt someone’s life beyond the $50,000 and $200,000 limits in Quebec and Ontario respectively. So, increasing TPL coverage to around $1,000,000 is quite common, especially in Ontario.

This is where shopping around for the best insurance company can save you money. Different car insurance providers will offer you a quote based on a fixed list of factors that determine premiums, but how much weight each provider gives to these factors can change. Here’s the list:

Type of car: The vehicle you drive can affect your insurance premiums more than any other variable. Two people with similar driving histories, but different cars could see hundreds or thousands of dollars separating their car insurance bills.

Age: Generally, as you get older your car insurance premiums go down since more mature drivers are less likely to take risks than younger drivers.

Sex and Marital Status: All insurance providers in Ontario use sex as a variable to determine insurance premiums (2). Married couples are considered safer drivers according to insurance companies because statistically, single people are more likely to get into an accident or get a ticket than a married person.

Driving Record: Any traffic ticket or accident can affect your car insurance premiums, but you might not notice a difference until you renew your insurance.

Location: If you live in a city or large urban area, your car insurance premiums will be higher than those living in rural areas because accidents and thefts/damage is more likely.

Distance: Driving a lot of kilometers each year will result in higher premiums.

Aside from all of that, the cost of insuring your car goes beyond you as the driver. Safety features of the vehicle, price range, brand reputation, age of the vehicle, amount and type of usage, and location all help assign the cost of your insurance premiums.

The trick is to find the insurance provider that is best for you, your vehicle, and your living and working situation. Most providers won’t list their prices online, but will request a conversation on the phone or via email to determine a quote for your car insurance needs. It can take some time and some effort, but the possibility of saving a few hundred dollars or more could be worth it.

What types of providers are there? How do they differ?

In Ontario and Quebec, there are many private car insurance providers, and they all offer the baseline, mandatory coverage. You have to buy this, however, it’s the optional perks where the best will stand out from the many.

When shopping for car insurance, review the costs of additional coverage options which are important to you. If you want all repairs after an accident made with parts from the same company that makes your vehicle, called original equipment manufacturer (OEM), then make sure the insurance company you select offers this option in their accident coverage.

Aside from specific insurance products, ratings and reviews will be one of your best allies while you shop around for a great deal. Car insurance companies, like all others, get rated and reviewed for customer service, price, knowledge, response time, etc. Take a minute to determine what traits are most important to you, obviously, a good price will be high on your list, and judge each insurance company you research by that standard.

You may feel daunted by the job of researching, corresponding with various companies, reading through offering documents, but if you select the first insurance company you hear about, you may lose out on a chance to save yourself some moola.

Tell me about different fees for different types of vehicles

But what about other types of vehicles and insuring them? Camper trailers, motorcycles, mopeds, snowmobiles, etc? 

Camper trailers do not legally need to be insured in Ontario and are covered by your liability insurance while being towed. But, when it’s parked, it is not covered at all. This is why many people choose to invest in some sort of trailer insurance. Some of the options like collision or comprehensive insurance will help pay for repair and replacement or cover unexpected damages from theft, vandalism, and severe weather.

Motorcycles and mopeds fall under the same category for vehicle insurance, and the premiums to insure them are determined largely the same way as car insurance premiums. There are a few trade secrets to help reduce the cost of insurance like taking a Driver Training Program at a government approved centre to reduce your premiums. These reductions, in particular, can be significant. 

You can purchase a bike below a certain cylinder capacity (cc) to lower your insurance costs. Bikes above 500cc are charged more to insure partly because of the increased risk to the rider and the bike. Another great way to keep your premiums down for your bike or moped is to maintain the insurance during the winter when you aren’t riding, this is known as Lay-Up Insurance. This will show brokers that you have a history of insuring your bike and can lower your insurance costs.

Snowmobiles, like motorcycles and mopeds, require the same four insurance products that are required for all other vehicles in Canada: third party liability coverage, statutory accident benefits coverage, direct compensation – property damage coverage, and uninsured automobile coverage. And, just like motorcycles, you do not need insurance while driving on private property. 

Snowmobile insurance can either be purchased as a stand-alone product or you can add it to your existing car insurance. However, snowmobile, motorcycle, and moped insurance are not offered by all brokers. You’ll need to shop around to find a provider.

Let’s Compare Insurance Prices Between Motorcycles and Cars

Some of the cheapest cars to insure in Ontario are SUVs and minivans, vehicles with consistently high safety ratings that aren’t high-powered sports cars. Car insurance companies love these big, safe, beasts because they’re usually driven by parents who make careful driving a top priority. Couple that with low-ish sale price and ease of repair, and you have a car insurance provider’s dream vehicle.

The Subaru Forester $1774, Dodge Grand Caravan $1786, Honda Odyssey $1800, Ford Escape $1877, and Toyota Sienna $1966 hold top spots in cheap insurance premiums in this province. The numbers above are averages and don’t factor in all the possible variables which car insurance providers consider. But still, the Forester’s annual premium works out to $147 each month.

Vehicles like sports cars, newest models, ultra-luxury, hybrids, and those most likely to be stolen will raise your insurance premiums. Believe it or not, the vehicle most popular with car thieves is the Honda CRV. In 2020 in Canada, different models of the Honda CRV were ranked 1, 3, and 6. 

Motorcycle insurance premiums, as mentioned before, are largely determined by size of engine (cc). High-powered, expensive bikes will cost more to insure than smaller-engined beginner motorcycles. Apart from that, where you store your bike, upgrades to security, and riding history can make a big difference in your premiums. Some sport bikes like the Kawasaki Ninja ZX600 could cost more than $2,000 per year if the rider is young and inexperienced, living in a high-traffic urban area.

The point with any and all vehicle insurance is to give the provider every reason to trust that your bike won’t cost them money, or very very little. The insurance companies make money by not shelling out compensation for repairs, replacements, and injuries. So, if you can give your provider assurance that you are a safe responsible rider, with a safe, lower-power bike unlikely to be stolen or damaged, you’ll help your own premiums decrease.

Whatever vehicle you own, with a few notable exceptions, insurance is a must in Canada. Saving money these days is also a must. Equip yourself with some solid information about the type of vehicle you need to insure, collect a few quotes from insurance providers, and you can turn an arduous, mandatory process into one where you secure the best price for yourself.