If you plan to buy a new car, then you may be wondering whether you can purchase one from a car dealership without insurance. This is a valid question, especially considering car insurance is mandatory in Canada. Many customers are confused as to whether they need to have a policy in place before driving off the lot or if they can purchase one after. We answer these questions and more below.
What you need to know about car insurance when buying a car from a dealership
If you are purchasing a new car, whether you are replacing an old vehicle or simply buying a new one, it is important to purchase car insurance. The car insurance you buy will be tailored to where you live. For example, you will need car insurance Toronto if you live in Ontario. If you are purchasing your first-ever car, then it is recommended that you purchase an insurance plan before completing your vehicle purchase. This is because, without an existing policy, you won’t be covered when you drive off the lot. In fact, many insurance companies will not allow you to drive out of the dealership with your new car unless you have shown proof of car insurance. If you are replacing a car and still have a valid car insurance policy on your last car, you might be able to use that as proof of insurance. However, you will need to make sure that you update your policy, adding your new vehicle to it, as soon as possible.
Most companies offer a 14-day window to update your vehicle, however the coverage remains the same from the old vehicle to the new one. Specifically, if you only had liability coverage on your previous vehicle, you would only have liability coverage on your new vehicle. you will need to do so before the grace period expires. Grace periods are up to 14 days, although they can be as short as the drive between the dealership and your home. Some insurance companies do not offer grace periods at all. In this case, even if you have an existing car insurance policy, you will still need to update your policy before driving off the lot if you want to be covered.
Do you need a new car insurance policy if you're adding or replacing a vehicle?
As stated, car insurance is a must when buying a new car from a dealership. However, whether you need a brand-new policy depends on several factors. If you already have a valid car insurance policy and your new car is replacing the old car that your policy covered, you can likely just add your new vehicle to your existing policy rather than buying a new policy altogether. Meanwhile, if you are a young or new driver, you might be able to be added to your parent or guardian’s car insurance policy, if they have an existing policy. Although a young driver can choose to get their own car insurance policy, this usually ends up being more expensive, which is why many customers choose to add their teenage children to their current policies.
Further, if you are leasing or financing your new car, there may be other requirements. You will still need to purchase auto insurance. However, you might need to purchase specific types of coverage that are over and above the minimum coverage requirements in your province. For example, many leasing companies require borrowers to add comprehensive and collision coverage to their auto insurance plans.
In addition, some leasing companies give borrowers a specified time frame from the date of signing the agreement in which to purchase car insurance. If they do not purchase car insurance within this time frame, and the agreement features a “forced place” clause, then the leasing company might have the power to pick and charge you for an insurance policy on your behalf. Thus, it is important to read through the terms and conditions of your contract carefully to make sure you understand what type of auto insurance policy you need to purchase and what date you need to purchase it by.
Car insurance for a new car
If you end up deciding to purchase a new car insurance policy for your new vehicle, it is crucial to understand how car insurance coverage works. Below, the BrokerLink team has laid out the most common types of car insurance coverage in Canada, some of which are mandatory and some of which are optional:
Third party liability coverage
Third party liability coverage is a type of mandatory car insurance coverage in Canada that protects drivers against liability claims brought against them following an accident. For example, if you get into a car accident that you caused, and it causes bodily injury or property damage, the other person or people involved could sue you. Many provinces required drivers to hold a minimum amount of third-party liability coverage, like Ontario which requires $200,000. Many drivers opt for a higher limit of coverage, to protect themselves in the event of an incident.
Accident benefits coverage
Accident benefits coverage is also a mandatory component of car insurance. This coverage can pay for medical fees if you get into an accident with someone who is injured and requires medical attention. Your insurer will cover these fees regardless of who caused the accident or who was affected, whether it be a passenger, driver, or a pedestrian. Examples of medical fees that accident benefits may cover include those not covered by health insurance like physical therapy, prescription medications, rehabilitation, etc.
Direct compensation - property damage coverage
Direct compensation - property damage coverage is also mandatory in many provinces and it can pay for the cost of repairing damage to personal property if an accident results in property damage. For example, if your car is damaged following an accident, your insurer may reimburse you directly for the cost of having it repaired, less your deductible.
Uninsured automobile coverage
Uninsured automobile coverage is the final type of mandatory coverage in Canada, and it is designed to safeguard drivers who find themselves involved in an accident with an uninsured driver or who fall victim to a hit-and-run.
Collision coverage is a type of optional car insurance coverage that you can choose to add to your policy. It can help you pay for damage to property following an accident with another vehicle or a grounded object. This type of coverage can be claimed whether the policyholder is liable for the accident or not.
Comprehensive coverage is another optional coverage type that many drivers choose to include with their policies. It is known for offering peace of mind because it is one of the few types of car insurance coverage that does not provide protection against collisions. It protects against non-collision events, such as a thief stealing your vehicle or a fire breaking out in your garage and damaging your car. More specifically, under comprehensive coverage, your vehicle will be protected against damages or incidents caused by named perils. Named perils range from glass water damage and fire to theft, vandalism, falling objects, and more. You can also choose all perils coverage for the greatest possible protection.
Accident forgiveness coverage
One final type of optional car insurance coverage popular among drivers is accident forgiveness. Accident forgiveness is additional coverage that can be added to your car insurance policy as an endorsement, to protect your driving record and to help prevent your insurance premium from increasing if you have an at-fault accident claim. Note: coverage varies by province.
New car insurance
If you are purchasing a brand-new car from a dealership, whether you need to take out a new car insurance policy or not, you may want to consider a few types of coverage to protect your vehicle. Why? New cars might have different needs than old or used cars. So, if this is your first time buying a brand-new car, the extra coverage might be worthwhile. A few examples of car insurance coverages for new cars that could be worth adding to your policy are as follows:
New car replacement coverage
New car replacement coverage is a type of coverage offered by some insurers. How it works is as follows: Your insurer will pay to replace your new car with another one of the same make or model and featuring the same upgrades. This coverage might be worthwhile due to how quickly a vehicle’s value drops in the first one to five years of ownership. That said, adding new car replacement coverage to your car insurance plan will increase your premium.
Repair provision coverage
Repair provision coverage is a type of optional car insurance coverage that may compensate policyholders for any repair costs that are above the actual cash value of the vehicle.
Lastly, gap coverage, also known as guaranteed asset protection coverage, is important for any policyholders who finance or lease their vehicles. Without gap coverage, if your leased or financed vehicle was totalled before you had paid it off, you would have to cover the remaining balance after your insurance provider paid the actual cash value of the car. But with gap coverage, your insurance provider would cover both the actual cash value of the car and the remaining balance.
Mandatory auto insurance in Canada
A quick note about mandatory auto insurance in Canada. Regardless of whether you purchase temporary car insurance from a dealership, buy a new policy before leaving the lot, or take advantage of your current insurance policy’s grace period and add your new car to an existing policy after purchasing, car insurance is a legal requirement in Canada. This means that if you intend to drive the new car you buy, you will need to purchase a valid car insurance policy. Failure to do so means breaking the law, and it puts you at risk of all kinds of severe penalties. Depending on the province and whether it is a first offence or a subsequent offence, you could be fined up to $50,000, have your vehicle impounded or repossessed, have your driver’s licenced suspended, and even face jail time. Thus, we strongly urge all drivers to purchase valid car insurance policies as soon as possible. For help, contact BrokerLink today.
What factors impact car insurance rates in Canada?
By now you may be wondering, how much is car insurance per month in Ontario? You are not alone. Anyone who has ever purchased car insurance has had this question. Ultimately, car insurance rates vary widely between drivers. Therefore, it is impossible to provide an estimate without knowing more information about you and your driving history. That said, the BrokerLink team can give you some insight into how car insurance rates are calculated in Canada. Below is a list of factors that you can expect your car insurance company to consider when determining your premium:
- Where you live (and where you regularly commute)
- Model, make, and year of vehicle
- Past claims
- Average mileage
- Driving experience
- Driving record
- Insurance history
- Deductible amount
- Regulatory bodies
- How you use your vehicle
To receive a free quote or learn more about how car insurance rates are calculated in Canada, contact BrokerLink today.
Tips to keep auto insurance rates low
Save money on car insurance without compromising on the quality of your policy. Below, the BrokerLink team has put together a list of cost-saving tips to help any drivers keep their car insurance rates low.
Review your policy before it expires
Anytime you are renewing car insurance, it is important to review your policy before it expires. Doing so can make you aware of the ways in which you want to update your policy. Depending on how you choose to update it, you may save money on insurance. If you want a professional opinion on the best way of updating your policy before renewal, contact BrokerLink. They can give you specific tips on how you can adjust it if you want to minimize car insurance costs. A BrokerLink insurance advisor can even help you with expired car insurance renewal if your policy is already past its term.
Pick a higher policy deductible
Picking a higher deductible for your car insurance plan is another great way to save money on car insurance. Insurers like it when customers select higher deductibles because it takes some financial responsibility off them. As a reward, you will usually be given a lower premium.
Maintaining a clean driving record by driving safely is one of the best things you can do if you want to keep auto insurance costs low. The better your driving record, the lower your premium is likely to be. Even better, if you maintain a clean record for a certain number of years, you might even qualify for a safe driver discount, lowering your premium even further. If you want to learn some safe driving tips from the professionals, get in touch with BrokerLink today.
Bundle insurance products together
Bundling more than one insurance product is another cost-saving tip. Insurance companies will often give discounts to customers who purchase more than one policy from them at the same time. Just make sure you meet the insurance company’s conditions to qualify. For example, not all types of insurance may be eligible for bundling, though auto, home, and motorcycle business insurance policies usually are.
Install snow tires on your vehicle
Installing snow tires on your car not only makes driving safer but it can reduce how much you pay for car insurance. This is a fantastic way of keeping costs down because it also keeps you safe, minimizing the odds of an accident. To qualify, you may need to meet specific criteria, like all four winter tires being the same make and model or having your tires installed by a certain day of the year.
Buy a hybrid or electric vehicle
Swapping out your gas-powered car for a hybrid or electric model that is easier on the environment can lead to major car insurance savings. Plus, eco-friendly cars will minimize your carbon footprint. So, if you decide to purchase a hybrid or EV, make sure to notify your insurance provider and ask about the electric vehicle car insurance discount.
Contact BrokerLink to learn more about purchasing insurance after buying a car from a dealership
Buying a new car is exciting. However, knowing what kind of insurance you need and when you need to have it can be stressful. Thankfully, BrokerLink is here to help. Get in touch with us today to learn all about car insurance requirements in Canada, including whether you can purchase a car from a dealership without insurance. One of our car insurance specialists will be happy to walk you through the process, answer your questions, and provide you with all kinds of helpful insurance advice. We can also match you with a great car insurance policy if you decide you want to buy a new one or update yours. A BrokerLink insurance advisor will shop around for you and compare rates to ensure you get the best possible coverage at a price you’re satisfied with. Call, email, or visit us today to get started.
FAQs on auto insurance after buying a car from a dealership
What is drive away insurance?
Drive away insurance is named for a type of insurance that temporarily covers you when you “drive away” from the car dealership lot after purchasing a new car. It is simply another name for temporary car insurance, which is sold by many car dealerships and insurance companies and is designed to cover policyholders from the moment they drive off the lot with their new car until the end of the term. Drive away insurance policies usually have very short terms, often lasting between one day to one month.
Do I need car insurance before I buy a car?
Yes. Car dealerships require all customers to show proof of a valid car insurance policy before driving off the lot. However, sometimes showing proof of an existing car insurance policy is valid, even if you haven’t added your new car to it yet.
Can I drive without insurance if I just bought a new car?
It is illegal to drive without insurance under any circumstances. If you are buying a car and do not have an existing insurance policy, you will need to purchase temporary car insurance or purchase a full-term auto insurance plan that begins on the date you pick up your new car.
Do I need car insurance to test drive a car?
No, you do not need car insurance to test drive a vehicle. This is covered by the car dealership’s insurance policy since the car is still owned by the dealership at this stage. That said, you will need to have a valid driver’s licence if you want to test drive a vehicle.
If you have any questions, contact one of our local branches.