Do You Need to Have Car Insurance?

12 minute read Published on Jul 16, 2022 by BrokerLink Communications

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If you recently got your driver’s license and want to start driving in Canada, you're probably wondering, “do I need to have car insurance?” The short answer is yes, but the long answer we dive into below.

The truth is that car insurance is one of the most important purchases you’ll ever make as a Canadian driver. It offers so many benefits to motorists, from financial protection to protection from the law.

Keep reading to discover more about mandatory car insurance in Canada, including why you need auto insurance and what types of coverage are compulsory.

Is car insurance mandatory in Canada?

Yes, car insurance is mandatory in Canada, and therefore you need it to be able to drive. However, car insurance isn’t federally regulated. It is regulated by the provinces and territories, which means each region of Canada has its own unique rules surrounding car insurance.

Though it is required no matter where you live in Canada, the specific coverage you will need to purchase depends on which province or territory you live in. For example, in Ontario and Alberta, all drivers must carry a minimum of $200,000 in third-party liability coverage at all times, whereas in Nova Scotia, motorists must hold no less than $500,000 in liability coverage.

Ultimately, whether you live in Vancouver, Red Deer, Ottawa, or Moncton, you will need to purchase auto insurance in order to drive your vehicle, and your policy must meet the minimum requirements set by your province.

Do all Canadian provinces and territories require auto insurance?

Yes, auto insurance is a legal requirement in all 13 Canadian provinces and territories. However, it is up to the government of each province and territory to set its own rules on car insurance, ranging from mandatory coverage types to minimum coverage limits. Therefore, each province and territory has its own unique rules and regulations on auto insurance that the drivers in that jurisdiction must abide by.

For example, in Ontario, drivers must purchase policies that include accident benefits coverage, direct compensation - property damage coverage, uninsured automobile coverage, and at least $200,000 in third-party liability coverage.

Why is car insurance mandatory?

Car insurance is mandatory in Canada to protect all drivers, passengers, and vehicles from the financial risks that come with driving. The main reason it’s required is that driving can lead to harm that costs a lot of money.

Drivers need to have insurance so that they can pay for damages that may result from an accident. Bodily injury and property damage are two common outcomes of collisions. Without auto insurance, you would be left to pay for medical expenses, vehicle repairs, or even a lawsuit on your own.

But with car insurance, your insurance provider can cover some or all of the costs, helping you avoid financial ruin.

Is car insurance mandatory if I don’t own a car?

Car insurance may not be mandatory if you don’t own a car, though it depends on the situation. If you occasionally drive someone else’s vehicle, such as your mother or father’s car when you visit them, you likely do not need insurance.

However, if you frequently drive someone else’s car, such as your spouse’s, then you will need to be added to their auto insurance policy.

Is it legal to drive without car insurance in Canada?

No, it is not legal to drive a car without insurance in Canada. Since auto insurance is mandatory, driving uninsured is illegal, and if caught, you could face serious consequences.

The exact consequences vary depending on the province or territory you are caught driving in but may include hefty fines, temporary suspension of your driver’s license, and even jail time.

For example, in Alberta, uninsured motorists can be fined between $2,875 and $10,000 for a first offense. Failure to pay this fine can result in jail time ranging from 45 days to 6 months.

For a second offense, the minimum fine for driving without insurance goes up to $5,000, and the maximum fine is $20,000. Again, failure to pay this fine can result in jail time lasting anywhere between 60 days and 6 months. In Ontario, the fines for uninsured driving are even greater than this.

Therefore, driving without insurance anywhere in Canada is not worth the risk. If you are thinking of driving without insurance, we strongly warn you against it. Instead, contact BrokerLink to learn more about car insurance laws in Canada.

No matter what province you live in, we can help you find a policy that meets your needs, lifestyle, and budget, and that also complies with local laws.

Four reasons drivers need auto insurance

Car insurance is mandatory in Canada for many reasons. Primarily, it offers financial protection to drivers, passengers, and other cars on the road. With the right auto insurance policy, you can be protected in a wide range of circumstances.

Some of the top reasons Canadian drivers need car insurance can be found below.

To protect yourself in case of bodily injury

If you are injured in a car accident, car insurance will come in handy. Even the standard car insurance plans cover bodily injury in Canada. So if you or someone else involved in the accident requires medical attention, your insurance provider can help cover the costs of care.

Specifically, they can help pay for medical expenses not covered by your health insurance policy, such as prescription medications, rehabilitation, or physical therapy.

To protect yourself in the event of an accident

No matter how safely or responsibly you drive, auto accidents happen. Having car insurance in your back pocket can help you prepare for one. Basic auto insurance plans in Canada will protect you from the financial ramifications of a collision.

For example, most car insurance plans will cover the cost of repairing or replacing your vehicle if it is damaged in a collision.

To protect yourself against theft

Depending on the auto insurance plan you choose, your vehicle may be protected from theft. Comprehensive coverage is optional insurance coverage available to all Canadian residents. This type of coverage, also known as parked car insurance, protects drivers from a variety of unforeseen incidents aside from collisions.

Under this portion of your policy, your vehicle will be protected in the event of damage caused by any insured perils. As the policyholder, you can decide which insured perils to include in your policy. Perils to choose from are theft, vandalism, floods, falling objects, earthquakes, hurricanes, and more.

To comply with the law

One final reason drivers in Canada need car insurance is that it puts them in compliance with the law. As mentioned above, car insurance is compulsory throughout the country, and driving without it can result in expensive fines, jail time, and license suspensions.

Avoid these risks by purchasing an auto insurance policy that meets the minimum requirements set by the province or territory in which you live.

Mandatory auto insurance coverage for drivers in Canada

Now that you know car insurance is required in Canada, you must understand which types of coverage are required. Car insurance policies are made up of coverages. Some of these coverages are mandatory while others are optional.

Each provincial and territorial government decides which coverage types and limits are compulsory. While they vary from province to province, most require coverage that protects drivers against collisions, liability, bodily injury, and property damage.

We’ll use Ontario as an example. In Ontario, all car insurance policies must including the following four types of coverage:

Third-party liability insurance

Third-party liability coverage is perhaps the most important mandatory coverage type in Canada. It provides legal protection if you injure someone else or cause property damage to another person’s property on the road.

For example, if you accidentally crash into your neighbour’s fence, rear-end another car at a traffic light, or cause an accident that injures another driver, you can claim liability coverage. This type of coverage can help pay for medical expenses associated with bodily injuries or repairs of damaged vehicles, as well as any applicable legal fees, court fees, and settlements up to the coverage limit.

In Ontario, drivers are required to hold a minimum of $200,000 in third party liability coverage at all times.

Direct compensation - property damage coverage

Direct compensation - property damage coverage protects an insured vehicle and its contents against property damage, as long as the policyholder is not liable for the collision that caused said damage. Under this type of coverage, the insurance company often pays for the repair or replacement of your car directly.

Note that to be eligible for direct compensation coverage, the collision must meet the following criteria: it occurred in Ontario, it involved more than one vehicle, and it involved at least one car that participates in the provincial auto insurance program.

Uninsured automobile coverage

Uninsured automobile coverage protects you and any passengers in your vehicle if you get into an accident with an at-fault driver who is either uninsured or underinsured. This type of coverage can also protect the policyholder in the event of a hit-and-run.

Accident benefits coverage

If you, a passenger, or a pedestrian requires medical attention following a collision, accident benefits coverage can help. You can claim this coverage no matter who is liable for the accident. It can help pay for loss of income or medical expenses that may not be not covered by health insurance, like prescription medications, physical therapy, or rehabilitation.

To learn more about mandatory auto insurance coverage in your province or territory, contact BrokerLink today. We have experts all over the country who can explain what compulsory coverage looks like, no matter where in Canada you reside.

Optional car insurance coverage for Canadian drivers

Though you are only required to purchase the mandatory auto insurance coverage listed above to legally drive in Canada, insurance companies offer several optional coverages for the benefit of drivers.

From collision coverage to comprehensive coverage, drivers in Canada might find it worthwhile to include additional coverages with their policies. A few of the most popular types of optional coverage are listed below.

Collision coverage

If you get into an accident with another car or object on the road, no matter who is at fault for the accident, collision coverage can help cover the costs. Under the collision coverage portion of your policy, you can be reimbursed for the costs of property damage that resulted from an accident, such as a vehicle repair.

Comprehensive coverage

Comprehensive coverage, also known as parked car insurance, provides unparalleled peace of mind to Canadian drivers. This is because it protects against a wide range of unforeseen incidents other than collisions.

Comprehensive coverage will compensate you in the event of damage caused by an insured peril. You can choose which perils to include in your policy, but they may include theft, vandalism, water damage, earthquakes, hurricanes, fires, riots, falling objects, and more.

Accident forgiveness coverage

One last optional coverage type that may appeal to drivers in Canada is accident forgiveness. This type of coverage is often recommended for new drivers or high-risk as it prevents the insurance company from raising your rate after your first at-fault accident.

How much car insurance do I need?

The answer to this question depends on your unique circumstances. At the very least, you need to purchase enough car insurance coverage to meet the minimum requirements set by your province. Anything less and your auto insurance policy won’t be valid.

However, provincial minimums are often inadequate and may not provide enough protection in the event of major damage or a lawsuit.

If you want better coverage, you will need to purchase additional coverage, like comprehensive coverage or collision coverage, as well as higher coverage limits for the mandatory coverages (for example, experts recommend no less than $1,000,000 in third-party liability coverage, even though some provinces only required $200,000).

If you would like a professional, unbiased opinion on how much car insurance coverage you need, get in touch with BrokerLink. We work independently of insurance companies, which means we can provide objective advice on the right coverage types and limits for you.

How does my insurance company calculate my premium?

Insurance companies in Canada will consider several variables when calculating your premium. Whether you want to buy a standard car insurance policy or one with additional coverage, the insurance company will consider the same list of factors to determine your rates.

Below is a list of the most common factors that impact auto insurance rates in Canada.

  • Where you live (and work - if you drive to work)
  • Age
  • Make and model of vehicle
  • Driving record
  • Driving experience
  • Past claims
  • Annual mileage
  • Prior insurance coverage
  • Marital status
  • Your deductible
  • Local laws
  • How you use your vehicle

Buy mandatory auto insurance through an insurance broker

When shopping for car insurance in Canada, enlisting the help of a reputable insurance broker is one of the wisest decisions you can make. By working with a broker, you will save time and money.

Plus, you will have a car insurance expert at your fingertips, available to answer any questions you may have, obtain quotes on your behalf, and walk you through your policy.

Check out the top three reasons to purchase car insurance through an insurance broker.

Brokers work independently

Did you know that insurance brokers work independently of insurance companies in Canada? It’s true, BrokerLink does not work for an insurance company, which allows us to focus on our customers’ needs. Our insurance advisors put the customer above all else, taking the time to understand their unique needs, lifestyle, and budget. Since we work independently, you can always trust that we are providing unbiased, objective opinions.

Brokers do the work for you

Yet another reason to work with an insurance broker is that they do the work for you. From the moment you contact BrokerLink, you will be assigned a dedicated insurance advisor who will work tirelessly to find you the best coverage at the best price. Specifically, they will obtain quotes, compare coverage options, and unlock discounts on your behalf. All the while you can sit back, relax, and spend your free time exactly how you want to be spending it.

BrokerLink advisors are car insurance experts

With over 30 years of experience in the insurance industry, we have earned the right to call ourselves auto insurance experts. Thanks to our endless resources and expertise, BrokerLink has helped thousands of Canadians find quality car insurance.

How to buy car insurance in Canada

Are you ready to purchase car insurance? BrokerLink is here. Thanks to brokerages like us, buying auto insurance couldn’t be easier. Follow these three steps to find competitive and affordable car insurance coverage in Canada.

1. Contact an insurance broker

The first step to finding the most comprehensive coverage at the most affordable rate is contacting an insurance broker. When you contact BrokerLink, we will take the time to learn about your specific needs and budget so that we can find the best auto insurance policy possible.

2. We shop around for you

BrokerLink knows that shopping around is an important step in finding the best auto insurance. But you shouldn’t have to do it alone. In fact, we put the onus on ourselves to shop around for you.

We contact Canada’s top insurance providers to obtain quotes and determine which one has the best auto insurance rate for you.

3. You get a great rate

At the end of the day, partnering with BrokerLink always results in a great car insurance rate. Since our insurance advisors are licensed insurance experts, we know where to look for the best deals. Once we’re done obtaining quotes, we will give you a few policy options to choose from and you can pick the one that’s right for you.

Get in touch with BrokerLink for a free car auto insurance quote

For more information on mandatory car insurance in Canada, contact BrokerLink today. We can further explain why you need to purchase car insurance and even provide you with a free quote.

Give us a call, send us an email, or visit us in person at one of many locations throughout Canada. No matter how you choose to get in touch, an expert will be ready to help you on your car insurance journey.

Start now by using BrokerLink’s online quote tool to request a free quote. Within minutes, you can receive an accurate, competitive, and obligation-free quote on your Canadian car insurance policy.

Get in touch today!

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