Alberta car insurance laws

Alberta operates under a private insurance model, unlike British Columbia or Manitoba, which function under a public system. What does this mean? In Alberta, numerous car insurance companies compete in the market, offering drivers the ability to choose among numerous auto insurance polices at different rates.

In 2022, Alberta introduced a Direct Compensation - Property Damage system, which fundamentally changed how non-at-fault drivers navigate their claims process to ensure ease and speed. Fast forward to 2025, the Alberta Government decided to cap their good driver rate cap from 3.7% to 7.5% until 2027, following a report by the Automobile Insurance Rate Board (AIRB) reporting an annual premium of $1,703 for drivers, one of the most expensive insurance rates in the country.

The province also plans to roll out a Care-First system in 2027, which will focus on providing more benefits to drivers following a car accident, faster care, and lower litigation fees that cause substantial rate increases.

Understanding these current and proposed reforms is crucial as an Albertan. They impact how you'll file claims, the premiums you pay, and whether additional coverage is needed moving forward. We go over this and more in our comprehensive guide below. Stick around for more information.

Understanding Alberta's car insurance laws

According to the Alberta Insurance Act, driving without valid car insurance is illegal. If you are found operating a vehicle without proper car insurance, you could potentially incur significant penalties, including:

• First offence: minimum of $2,875 up to $10,000 in fines.
• Same offence within five years: Minimum fine of $5,000 up to $20,000. Failure to pay within a certain time frame can result in jail time.

When we think about car insurance in Alberta, we can separate insurance policies into two categories: mandatory auto insurance coverage and optional coverage. This means that at a minimum, all Alberta motorists must carry certain policies and coverage limits to operate a motor vehicle on public roadways. Beyond these insurance policies, drivers have the option of purchasing additional coverage for added protection.

Mandatory auto insurance in Alberta

The mandatory auto insurance policies required by all drivers in Alberta include:

Third-party liability

Third-party liability car insurance protects drivers if they cause bodily injuries or property damage to a third party while operating their motor vehicle. For example, if you're driving into Edmonton for the weekend and rear-end someone merging off the highway, causing damage to the other driver's vehicle, third-party liability will kick in to cover the cost of repairs or replacements needed. Third-party liability insurance also covers the cost of medical bills, legal fees, funeral expenses, and other associated expenses that may arise if the other party decides to sue you for damages.

In Alberta, the minimum requirement for third-party liability is $200,000. However, most drivers tend to opt for limits as high as $1 million for peace of mind. With legal costs increasing 31% since 2018, higher limits are recommended.

Accident benefits coverage

Accident benefits coverage is also a mandatory auto insurance policy for Albertans. With accident benefits insurance, you'll be compensated for medical expenses, rehabilitation, and other related costs if you, your passengers, or pedestrians are involved in an accident and suffer bodily injuries. Accident benefits kick into place regardless of fault.

Direct compensation for property damage (DCPD)

DCPD allows you to claim damage to your vehicle directly from your own insurance company if you are involved in an accident and not at fault. This new mandatory coverage streamlines the claims process, as you do not need to wait for the at-fault driver’s insurance to cover your damages.

Note: DCPD only covers physical damage to your vehicle after a collision, not pain and suffering, that fall sunder your accident benefits portion of your auto insurance plan.

Section C: Optional coverage

Section C of Alberta's standard auto insurance policy encompasses optional coverage specifically designed to cover physical property damage to your vehicle. The types of auto insurance included in this section include:

Collision coverage

Collision coverage protects your vehicle in case of an accident, regardless of fault. It covers the cost of repairing or replacing your vehicle, minus the deductible, after a collision with another vehicle or object. Vehicle repairs increased by 22.3% since 2019. Without this automobile insurance, you could face a hefty repair bill that impacts your finances.

Comprehensive coverage

Comprehensive coverage ensures you're covered in the event your car is damaged in a non-collision event. For example, damage caused by theft, vandalism, fires, weather damage, falling objects, and animal collisions is covered under this policy. Again, only a deductible is paid to your insurance company before it covers the remaining expenses.

According to Statistics Canada, auto theft claims reached $1.5B in 2023, up 254% since 2018. If you live in an area with higher property crime rates or park your vehicle on the street, this insurance coverage can come in handy.

All perils insurance

All perils car insurance combines collision and comprehensive coverages, with added protection against theft of your vehicle by someone you know, ensuring you have full coverage.

Section C becomes valuable if you are at-fault in a car accident or involved in a single-vehicle incident, such as hitting a pole or sliding on ice in the winter. It also comes in handy when an at-fault driver is uninsured or cannot be identified, like in a hit-and-run.

Each policy listed under Section C is subject to a deductible, which typically ranges from $250 to $1,000. This deductible amount is what you agree to pay to your insurance company when filing a claim before any remaining costs are covered. You also have the option of adding other endorsements to your plan, including loss of use coverage, which can cover temporary transportation costs when your vehicle is being repaired, or accident forgiveness, which prevents you from experiencing an insurance rate increase following your first at-fault accident.

Why direct compensation automobile insurance matters

As we mentioned, Alberta introduced direct compensation for property damage as a mandatory auto insurance policy for all drivers in January 1, 2022, which essentially changes how drivers navigate their insurance claims process when they are not at-fault drivers.

The reform was a part of a broader initiative looking to reduce the number of legal disputes between drivers, shorted vehicle repair timelines, and lower costs within the insurance industry in general. Before this policy was mandated, many drivers across the province faced delays, instances of miscommunication, and lengthy legal battles for repair expenses.

With direct compensation in place, the entire process is more streamlined and transparent. Drivers are able to communicate directly with their insurance company who they already have a relationship with for one point of contact, causing less stress, quicker repairs, and fewer court challenges.

Impacts on automobile insurance rates

In theory, the introduction of direct compensation insurance in Alberta was expected to reduce or at least stabilize insurance premiums. However, this isn't the case for all drivers.

For example, some drivers have seen lower premiums, particularly those with clean driving records or little to no claims on their insurance history. In contrast, high-risk drivers like young motorists, or those with numerous claims and poor driving records have seen an increase due to inflation, the amount of of insured loss payouts, which reached a record-breaking $3.1 billion from weather-related damages in 2024 alone.

How to prepare your automobile insurance moving forward

Ultimately, the best thing you can do to keep your car insurance as affordable as possible is to:

• Review your coverage yearly when you're up for a renewal, including coverage limits and deductibles.

• Maintain a clean record by driving safely and responsibly.

• Work with an insurance broker like BrokerLink, who can explain your options, shop around with different insurance companies to compare rates and options, and answer any questions you may have during the process.

• Stay informed on future policy reform, like the Care-First System set to roll out province-wide in 2027.

Road laws and fines that Alberta drivers should know

There are numerous road laws and regulations that drivers need to follow to ensure their safety and the safety of others on the road:

• Valid driver's licence: You must have a valid driver’s licence to operate a vehicle in Alberta legally.

• Driving under the influence: The legal blood alcohol concentration (BAC) limit is typically 0.08, but for new drivers and commercial drivers, it’s lower or 0.0.

• Vehicle registration and insurance: All vehicles on Alberta roads must be properly registered and insured. Proof of insurance and vehicle registration must always be carried in the vehicle.

Do I still need collision coverage if DCPD applies to my collision damage?

Yes, DCPD auto insurance coverage only applies to accidents where you are not responsible, like when someone rear-ends you. If you are responsible for the collision, such as hitting a stationary object, or causing the accident yourself, then your vehicle damages would be covered under the collision or comprehensive portion of your policy, should you choose to opt in at the time you purchased your coverage.

What if the at-fault driver doesn't have a valid insurance policy?

If a driver hits you while operating their motor vehicle and they do not have proof of valid insurance, you can file a claim with the Motor Vehicle Accident Claims program (MVAC) that is overseen by the Government of Alberta. This enables those harmed to file a claim for damages if the motorist is uninsured, underinsured, or unknown. Note that there are requirements you need to meet to be eligible for the program:

1. Must be a resident of Alberta.

2. The accident must have occurred in Alberta.

3. Liability for the accident is on the uninsured or unknown motorist.

4. Must have suffered a bodily injury as a result of the motor vehicle accident.

What is excluded under DCPD?

What isn't included under DCPD automobile insurance is pain and suffering, vehicle upgrades, or emotional damages that may arise as a result of the vehicle accident.

How do I file a not-at-fault claim?

Contact your own insurance company, even if you're not at fault. Your insurer will handle the process and communicate with the other driver's insurer behind the scenes. The process is typically faster and more convenient for insured drivers.

Will DCPD automobile insurance affect my premiums?

Whether or not DCPD automobile insurance will affect your current rates depends on your risk profile as a driver. Insurance companies consider numerous factors like experience, claims history, gender, where you live, and more. We recommend reaching out to an insurance broker if you are up for a renewal for assistance comparing quotes from multiple providers.

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