Month to month car insurance

12 minute read Published on Jun 28, 2023 by BrokerLink Communications

Car toy vehicle with stack coin money on a table.

If you're looking for a short-term car insurance solution, month-to-month car insurance might be a great option. Depending on your circumstances, such as whether you own your car or are renting or borrowing it, your options will be different. Continue reading to learn more about short-term car insurance options like temporary car insurance, rental car insurance, and more.

Temporary car insurance defined

Temporary car insurance is a type of short-term car insurance that is intended for drivers who do not need the standard one-year term offered by most car insurance providers. Temporary policies range in length, lasting as little as a few days, weeks, one month, or a few months. So if month to month car insurance is what you're after, temporary auto insurance might be right for you.

Temporary car insurance aims to provide policyholders with the same coverage as a full-term car insurance plan but on a “pay per use” basis. Such plans are generally considered to be more flexible. That said, month to month car insurance plans are not usually offered by traditional car insurance companies, which instead specialise solely in one-year or six-month car insurance products. Therefore, you may need to purchase temporary insurance from another source.

Many people confuse annual policies on monthly payment plans for month-to-month car insurance, believing that because they pay monthly if they cancel their policy there will be no repercussions as the policy is paid for monthly. However, it is important to note that is not the case.

When do you need short term car insurance?

Short term car insurance isn’t for everyone. Whether it’s right for you will depend on your circumstances and driving habits. The following is a list of circumstances in which drivers might find month to month car insurance worthwhile:

  • You recently bought a used car.
  • You are travelling to Canada and only staying for a few weeks or months.
  • You are transferring ownership of your car to another driver and the current licence plate being used is short-term.
  • You only drive your vehicle seasonally and occasionally, like a collectable car or vintage motorcycle that you only drive during the summer.
  • You are a student who has returned home for the summer, and therefore you only require car insurance for four months.
  • You are buying a travel trailer, such as an RV, to take on road trips, and thus only need auto insurance when you are on vacation.

Is month to month car insurance available in Canada?

Temporary car insurance is only available in some Canadian provinces and territories. However, there is one major exception and that’s Ontario. Ontario has extremely strict insurance regulations, and Ontario insurance companies are prohibited from selling temporary car insurance coverage. This means that if you need car insurance in Toronto or anywhere else in the province, you will likely need to purchase a full-term policy. Note that some insurance companies in Ontario may be willing to offer you a six-month policy, but these are harder to come by, which means you should be prepared to purchase a year-long plan.

Alternative options for short term car insurance in Ontario

If you live in Ontario and do not want a full-term car insurance policy, you have a few options:

Cancel your car insurance policy early

The first option is cancelling your car insurance policy early. Since most Ontario insurance providers only offer policies with twelve-month terms, one option is to purchase such a policy and then cancel it after only a few months or however many months you need the coverage for. Although you are within your rights to cancel your car insurance policy at any time, chances are you will incur a penalty. Cancellation fees for car insurance policies can be steep. Be sure to consult with an insurance broker who can help you understand the financial consequences of cancelling car insurance early. Further, if you do decide to cancel your policy but you still plan on driving in Canada after that, make sure you have another plan in place that begins the same day that your old policy is cancelled. Otherwise, you risk a lapse in coverage, which can have serious consequences, including an increase in your car insurance premium.

Special permit

If you need car insurance coverage for just ten days or less, obtaining a Temporary Vehicle Registration or special permit might be the way to go. A special permit provides coverage for a car that is not yet registered with the province of Ontario. However, special permits expire just ten days from the date of issue, making this an extremely short-term solution. In addition, special permits are typically only an option if you are importing a car from outside the province or you are a new resident of Ontario who recently purchased a new car. Please note that you can only apply for a maximum of two special permits for passenger vehicles in a period of twelve months.

MyPace pay-as-you-go insurance

Another alternative to temporary car insurance for Ontario drivers is the MyPace pay-as-you-go insurance program. This was introduced by the Canadian Automobile Association. You still need a valid car insurance policy to take advantage of this program, but it can help reduce your premiums. The MyPace pay-as-you-go insurance program is designed specifically for occasional drivers who drive fewer than 9,000 kilometres annually. How the program works is as follows: A device tracks your mileage and then adjusts your car insurance premium so that it reflects the distance you’ve driven or the number of times you’ve driven. The main difference between the MyPace pay-as-you-go program and other similar programs, such as telematics, is that the former is based solely on mileage driven and it can reduce your premium regardless of your driving behaviour or habits.

Add a driver to your existing car insurance policy

Depending on your situation, adding a driver to your existing car insurance policy could be a solution. For example, if you are borrowing a car from a friend or family member for a temporary period, find out if they would be willing to name you in their policy. This might increase the cost of their coverage, but it would ensure you were covered while driving their car, which is important if you plan to drive it regularly.

Rent a car

One final alternative to purchasing temporary car insurance in Ontario, which is not possible, is renting a car. Renting a car is typically more expensive. However, with a rental car, you would be able to purchase insurance directly from the rental car company without having to pay any cancellation fees.

Do you need month to month car insurance?

Before you go out and purchase a temporary car insurance policy, let’s first consider whether you really need one. The following is a list of scenarios in which you might find that a different type of car insurance might be better suited to you:

  • You own a vehicle and need coverage for a period of less than six months: If you live in Ontario, your best option might be to purchase a full-term, year-long car insurance policy and then cancel it early. Although you are likely to incur cancellation fees, the money you are refunded might still make it a better deal than many other options.
  • You own a vehicle and are letting someone borrow it: In this scenario, temporary car insurance is likely unnecessary, since your existing car insurance plan should cover the person you are lending your vehicle to. Remember that car insurance covers the car, not the person driving. Therefore, as long as this person has your permission to drive the vehicle, you shouldn't need a new or temporary car insurance policy.
  • You don’t own a car but need insurance because you are renting: If you are considering purchasing temporary car insurance for a rental car, think again. Although this is an option, the easier solution is to purchase rental car insurance coverage, which can often be bought directly from the rental car company. Temporary or traditional car insurance coverage is usually not necessary.

How to obtain temporary car insurance

If you decide that temporary car insurance is right for you, such as if you are in a situation where you will be owning a car for six months or less, you need to know how to buy it. Generally speaking, temporary car insurance policies last six months in length. As with a full-term, year-long policy, policyholders can choose to pay for the full term upfront or pay in monthly installments. When you no longer need the policy, you can cancel it. However, if you decide to cancel it before the end of the term, you may have to pay cancellation fees. Keep in mind that not all provinces offer temporary car insurance, Ontario being one of them.

Temporary auto insurance vs. non owner auto insurance

Some customers use the terms temporary auto insurance and non-owner auto insurance interchangeably, but there are several key differences. The main one being that non owner car insurance, as the name suggests, is a type of auto insurance designed for people who drive but who do not own their vehicles. It is best suited to people who rent or borrow cars frequently or who use car share services frequently. Oppositely, temporary car insurance plans are intended for owners of vehicles. Non owner car insurance policies are often less expensive than traditional car insurance plans, and they protect the driver, not the vehicle. This is the opposite of standard auto insurance, which follows the vehicle vs. the driver. Non owner auto insurance provides drivers with liability coverage, protecting them from the cost of injuries or property damage following an at-fault accident.

The pitfalls of temporary car insurance

When deciding whether to purchase a temporary car insurance plan, it’s important to be aware of the pitfalls. While temporary car insurance, if available where you live, can offer increased flexibility and control, it also usually comes with a few pitfalls:

  • Temporary car insurance coverage can’t always be used right away: For example, comprehensive and collision coverage might be subject to a 30-day waiting period before you can file a claim, and if your policy is only a couple of months to begin with, this waiting period can make a big difference.
  • Temporary car insurance can be difficult to find: Many insurance companies do not offer temporary car insurance policies or have stricter conditions for such policies due to them attracting high-risk applicants. Some provinces, like Ontario, do not offer temporary car insurance plans at all. Therefore, you are unlikely to find a major insurance company offering a car insurance product that is less than six months in length.
  • Your temporary car insurance coverage could lapse: Any time you purchase a short-term insurance policy, there is an increased risk that the policy will lapse while you are still driving the car. Since auto insurance is mandatory in Canada, if your policy lapses, you will be driving illegally, which could have major consequences. Uninsured drivers in Canada can face hefty fines, driver’s licence suspensions, and even jail time, depending on the province.

FAQs on month-to-month car insurance

Is an annual car insurance policy cheaper than temporary car insurance?

Temporary car insurance might be the most cost-effective option if you only need car insurance for a number of hours, days, or weeks. However, if you need car insurance for over a month, it would likely make more sense to purchase an annual car insurance policy and cancel it early. Shop around to find a policy with no or minimal cancellation fees and to ensure you get the most competitive rate for your coverage.

Do I need temporary car insurance if I have homes in two different provinces?

If you are frequently driving between two provinces in Canada, temporary car insurance likely will not be required, so long as your auto insurance policy meets the minimum coverage requirements in both provinces.

I am a student who is studying outside my home province. Do I need temporary car insurance?

Students who are away from home temporarily for school likely do not need to purchase a separate temporary car insurance policy. Rather, if your permanent address is still your parent’s home address, you can continue receiving coverage in your home province. Most insurance providers allow post-secondary students to remain covered according to their home address rather than their school address, though we recommend confirming this with your insurance company directly.

Do I need temporary car insurance for my RV?

If you are going on a vacation in your RV and only need insurance for a short period of time, contact your insurance company and ask about your options. Some insurers offer part-time RV insurance for campers, trailers, and caravans since it is common for these vehicles to only be driven for part of the year.

Does my car insurance policy cover a rental car?

Some car insurance policies cover rental cars but others do not. If you have basic coverage, chances are it doesn’t. Thus, if you choose to rent a car, you will need to purchase rental car insurance from the rental car company. You may also get rental car insurance through your credit card company, though you will need to verify this with them.

Do I need short term car insurance if I'm borrowing a friend’s car for a couple of days?

Typically, no. Short term car insurance would not be required in such an instance. If the owner of the vehicle has given you permission to drive and has their own valid car insurance plan, then you should be covered by their policy. That said, it would be wise to check with your insurance company directly before lending out your vehicle. Oftentimes, when a vehicle is lent it means that you are also lending your insurance, so in the event that something were to take place, your policy would respond to cover the damages, not the policy of the person driving the vehicle.

Can I get a one-month car insurance policy?

You typically will not see car insurance plans advertised that will cover you for just one month. However, you may be able to find a short term plan of six months or purchase a one-year plan and then cancel it early, though in the latter case, you may want to find one that does not charge cancellation fees if you decide to cancel after just one month.

Can I get a one-week car insurance policy?

Some temporary car insurance plans may offer coverage for one week or less. However, you will need to shop around to find a provider that will offer this, as this is not standard. If you only need a vehicle for one week and you do not own the vehicle, renting a car and purchasing rental car insurance for that one week might be a better idea.

How can I add someone to an existing car insurance policy?

If you decide that you would like to add another driver to your car insurance policy rather than purchase a separate temporary car insurance plan, you can do so by contacting your insurance provider. You can typically add another driver to your policy online, over the phone, or in person at an insurance office. Be prepared to provide information about this driver.

Does temporary car insurance coverage begin immediately?

Yes, just like with a traditional car insurance plan, temporary car insurance plans can begin immediately or on the date you select. However, there may be a waiting period to make a claim, especially for optional coverages like comprehensive and collision coverage.

How long does short term car insurance last?

Short term car insurance policies vary in length, though you can expect them to have terms shorter than the typical 12 months.

Can I drive without car insurance in Canada?

No, you cannot drive without car insurance anywhere in Canada, whether you live in Prince Edward Island, British Columbia, or anywhere in between. Car insurance is a legal requirement throughout Canada, which means choosing to drive without it is illegal. Penalties for uninsured driving vary between provinces but may include fines of up to $50,000, jail time, having your vehicle impounded, and having your driver’s licence temporarily suspended. Please note that the consequences for driving without insurance only increase the more times you are caught. Given these very serious consequences, driving without insurance is not worth it. Thus, before you get behind the wheel, make sure you have a valid car insurance policy that meets the minimum coverage requirements in your province.

Do I need temporary car insurance when renting a car?

If you are renting a car, then you can likely purchase rental car coverage directly from the rental car company, which will be cheaper and less of a hassle than trying to purchase a separate temporary car insurance policy. If you already have a traditional car insurance plan, it might even cover rental cars. Some credit cards also have perks such as rental car coverage when travelling.

If you have any questions, contact one of our local branches.