Your guide to car insurance as a newcomer in Canada

Canada's vast landscapes and bustling cities make a car a valuable asset, especially for newcomers. As you settle into your new life in Canada, you may want to understand the ins and outs of car ownership — and it begins with auto insurance.

Auto insurance regulations in Canada can vary from one province to another. For instance, in British Columbia, the provincial government manages auto insurance through the Insurance Corporation of British Columbia (ICBC), making it a public insurance system.

Other provinces like Ontario and Alberta operate under a private insurance model, where multiple private insurance companies offer coverage options. The differences in these systems results in varying premium rates, coverage options, and even the types of coverage available to drivers.

This guide is designed to help newcomers navigate the world of Canadian car insurance, providing valuable information and tips to ensure you're adequately protected on the road.

Types of insurance coverages

In Canada, car insurance is divided into mandatory and optional coverage. If you want to drive, you need to meet the minimum insurance requirements. A basic insurance policy will meet your legal requirements for driving in your province, but you may want to consider going beyond that to give you better peace of mind on the road.

Mandatory coverage

Mandatory coverage is the basic level of insurance that every driver in Canada is legally required to have. These requirements are in place to ensure that all drivers have a fundamental level of protection in case of accidents or mishaps on the road. The main components of mandatory coverage include:

Third-party liability: This is the core of mandatory coverage and provides financial protection for damages you may cause to others, including injuries and property damage. It's the foundation of responsible driving in Canada.

Accident benefits: Accident benefits are essential for covering medical expenses and rehabilitation costs in the event of an accident, regardless of who is at fault. This ensures that all parties involved receive the necessary medical care and support.

Uninsured/underinsured motorist coverage: In cases where you're involved in an accident with a driver who either doesn't have insurance or doesn't have enough insurance, this coverage ensures that you're not paying for another driver’s lack of insurance.

Optional coverage

Optional coverage goes beyond the basic legal requirements and provides additional protection for you, your vehicle, and your passengers. While these are not legally mandated coverages, they can offer extra protection on the road. Some of the key aspects of optional coverage include:

Collision coverage: This covers the cost of repairing or replacing your vehicle if it's damaged in a collision, regardless of who is at fault.

Comprehensive coverage: Comprehensive coverage extends protection to non-collision incidents such as theft, vandalism, natural disasters, and animal collisions.

Additional benefits: You can also opt for supplementary benefits like rental car coverage, roadside assistance, and more, depending on your specific needs and preferences.

Who qualifies and what’s required for car insurance

To secure car insurance in Canada, there's an eligibility criteria and certain legal requirements you must meet before you get your car on the road:

Residency and citizenship status: To qualify for car insurance in Canada, you generally need to be a resident of the country or have legal status. Insurance providers require proof of your residency or immigration status as part of the application process.

Driver's license: Most provinces in Canada impose specific timeframes for newcomers to acquire a Canadian driver's license. In Ontario, visitors with a valid foreign license can drive for 90 days with insurance and proof of ownership. Permanent residents must apply for an Ontario license within 60 days. In British Columbia, international students and temporary foreign workers with federal work permits can drive for up to 12 months on their home country or province's valid license.

Vehicle registration and inspection: To legally drive a vehicle in Canada, your vehicle must be registered in the country and comply with safety and emissions standards. Depending on your province or territory of residence, you may also be subject to periodic vehicle inspections. Complying with these registration and inspection mandates helps to maintain your eligibility for car insurance and avoid legal issues while driving in Canada.

Related: Are you a new resident driver in Ontario?

How cost of car insurance is determined

Car insurance is tricky because there's no one-size-fits-all policy. Your premiums (which are regular payments you make to your insurance provider) will be influenced by a variety of factors that are unique to you.

Deductible: The deductible is the amount you pay out of pocket before your insurance coverage kicks in. Choosing a higher deductible can lower your premium — but it also means you'll pay more out of pocket in the event of a claim. For example, if you get into a car accident, and your damage has a total cost of $3,000, and you have a deductible of $500, this is the amount you contribute while your insurer provides the remaining $2,500.

Age and experience: Younger and inexperienced drivers often pay higher premiums due to their increased risk profile.

Vehicle type and age: The type and age of your vehicle can influence your premiums. Luxury or high-performance cars, or those more prone to costly repairs often come with higher insurance costs.

Location and commute: Where you live and the distance you commute can impact your premiums. Urban areas and longer commutes may lead to higher rates because of the increased risk of accidents and theft. (In general, the more time you spend driving, the higher your chances of accidents).

Claims History: Your personal claims history and driving record indicates to your insurance company how risky of a driver you are. As a result, a history of accidents or frequent claims can result in higher premiums.

Understanding these factors and their impact on your insurance costs can help you evaluate your car insurance options. .

Related: Tips to help young, single drivers save on car insurance

What about my previous driving and insurance history from my home country?

Insurance companies often consider your prior driving experience and claims history when determining your insurance rates, even if your driving history occurred outside of Canada.

Here's how it works:

No claims bonus: In some cases, newcomers with a clean driving record and no history of claims may be eligible for a "no claims bonus" or a discount on their insurance premiums. This can help reduce the cost of insurance in Canada.

Insurance documentation and validation: If you’ve driven before, you’ll need to provide documentation of your previous insurance history when applying for car insurance in Canada. This can include proof of insurance coverage, claims history, and a valid driving record from your home country. Some Canadian provinces may have agreements with other countries that allow insurance history to be taken into consideration when determining insurance rates.

Graduated licensing programs: Depending on the province or territory in Canada where you settle, you may need to go through a graduated licensing program, which can also influence your insurance rates. Your previous driving experience may or may not be considered in determining the level of the graduated licensing program you enter.

Related: 6 consequences of lying to your insurance company

How to shop and save on auto insurance

You always have options when it comes to choosing the most economical policy while still ensuring you have adequate coverage. Here are some key approaches:

Develop your driving experience: Complete your full driving licensing requirements based on where you live, and consider taking driving classes to bolster your safe driving skills in Canada while you build your driving experience.

Get added as a secondary driver: If you’re considered a higher risk driver — say, if you’re young or don’t have much driving experience — and there's another licensed driver in your household, being added as a secondary driver to their insurance policy would help you cut down on premiums. Plus, as a secondary driver, you’ll still get to build your driving experience in Canada, which can eventually lead to lower premiums when you decide to get your policy.

Choose an affordable car: When choosing a vehicle, opt for older models with lower insurance costs. Newer cars often come with higher repair and replacement costs, leading to higher insurance premiums. Instead, focus on vehicles that are known to be affordable and reliable, and have a good safety rating.

Raise your deductible: By setting a higher deductible and accepting more financial responsibility in case of a claim, you can reduce your premiums. However, be careful not to raise your deductible beyond what you can afford to pay out of pocket should the need arise.

Winter tires discount: Winter tires are essential for safe driving during harsh Canadian winters. Besides enhancing your safety on Canada’s icy roads, using winter tires can also earn you a discount on your car insurance. In Ontario, for example, insurers are required to provide a discount of up to five per cent to drivers who use winter tires.

Bundle your home and auto insurance: As you continue to build your life in Canada, you’ll likely be looking into other forms of insurance when buying or renting a home or condo. Bundling your home or tenant insurance policy with your auto insurance from the same provider can lead to significant savings.

Compare rates online: The Canadian insurance market is competitive, and rates can vary significantly between providers. Take advantage of all the options out there and compare insurance rates from different companies to get the best rate for your coverage needs.

Maintain a clean record: Keeping a driving history clean of accidents and traffic violations shows insurance companies that you’re a responsible driver. Eventually, building a history of safe driving in Canada can lead to lower insurance rates.

Read more: How to buy car insurance in 6 easy steps

What happens after I buy car insurance?

Here’s what you can expect and consider after you’ve successfully purchased your first insurance policy for your car:

Review your policy documents: Review and understand your policy documents, including coverage details, limits, and contact information for your insurer.

Make your payments: After purchasing insurance, you'll need to make regular premium payments. Just make sure you pay on time or enroll into autopay to maintain your coverage.

Hold on to your pink slips: You'll receive a "pink slip", or proof of insurance, which you must always keep in your vehicle.

Navigating claims and disputes

In the event of an accident, follow these steps to file a claim:

  1. Contact your insurer immediately.
  2. Provide accurate and detailed information.
  3. Complete any required claim forms.

The right to dispute a claim

If you disagree with your insurance provider's decision or settlement offer, you may be able to raise the issue through their dispute resolution process. If a dispute remains unresolved, consider consulting with a lawyer who specializes in insurance claims to protect your rights.

Getting auto insurance in Canada can be confusing, but the right coverage will keep you safe on Canadian roads.  Some insurance brokers specialize in serving newcomers, and they may also help you simplify the process.

Additionally, each insurance company has its own policies and procedures when it comes to evaluating the driving history of newcomers. You'll want to know what type of coverage you need and compare different auto insurance rates and companies. By following this guide, you'll be well-equipped to make informed decisions and stay protected behind the wheel for the rest of your driving life.

Remember, as a newcomer, your peace of mind on the road is a top priority, and the right car insurance is your key to achieving it. Safe travels, and welcome to Canada!

Read next: What are the penalties for driving without insurance in Ontario?

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Arshi Hossain, Writer and Editor

Arshi Hossain is a writer and editor at RATESDOTCA. She has 4+ years of experience in delivering strategy-backed digital content through various mediums. Her expertise lies in breaking down complex information, meeting people where they are, and in the moments that matter.

Prior to joining RATESDOTCA, she worked in the editorial and digital content space at Wealthsimple, supported digital strategies, and UX writing for payment products and solutions at Bank of Montreal. She has also worked with startups to support editorial, content writing, communications, copywriting, and marketing needs.

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