What your auto insurance plan must include

8 minute read Published on Apr 14, 2024 by BrokerLink Communications

Businessman hand holding a yellow umbrella that's covering a red car toy on a table.

If you’re thinking of buying a car insurance policy, then you might be wondering what your auto insurance plan should include. Knowing what should include is just important - it’s essential, especially when you consider that car insurance is government-mandated in Canada. This means that if your auto insurance plan doesn’t include what is required, then you aren’t legally able to drive. Continue reading to gain insight into what car insurance plans include and how a broker can help you find the ideal policy.

Auto insurance plans must include mandatory coverage

First and foremost, auto insurance plans in Canada must include insurance coverage. Coverage is a key part of the insurance contract between the insurer and insured. In essence, when you pay for insurance, coverage is what you’re paying for. However, not just any coverage will do. Your policy must include the mandatory coverage types in your province. We will use the province of Ontario as an example. In Ontario, all car insurance policies must contain the following four coverages:

The four coverages listed above are mandated by the Government of Ontario. Driving without them is illegal. There are serious consequences if you are caught driving without insurance. For example, you could be fined up to $25,000 for a first offence and up to $50,000 for a second offence. You will also need to pay a 25% surcharge on top of whatever fine incurred. Beyond this, a law enforcement officer could also have your vehicle impounded or your driver’s licence suspended. For this reason, make sure that your auto insurance plan contains no less than the mandatory coverage in your province.

Mandatory car insurance coverage explained

To give you more insight into the types of auto insurance that you must have in your policy, keep reading for a breakdown of how mandatory coverage protects policyholders:

Third party liability coverage

First, third party liability car insurance is designed to help policyholders who end up in at-fault accidents. Ontario drivers must have at least $200,000 in third party liability coverage added to their policies. However, many opt to purchase higher limits, e.g. $1,000,000 or $2,000,000 in liability coverage. This type of coverage can pay for all kinds of costs related to an at-fault collision, such as medical bills, repair bills, and legal fees, including any settlements that result from a lawsuit.

Accident benefits coverage

Accident benefits coverage is the next type of mandatory car insurance coverage in Ontario. Also known as statutory accident benefits coverage, this type of insurance will cover injury-related costs that arise from a collision. For example, if someone experiences bodily harm following an accident, they can file an accident benefits claim to cover medical expenses, lost income, funeral fees, attendant care, and more. In addition, it’s worth noting that accident benefits can cover you regardless of which party caused the accident. Keep in mind that people can suffer injuries from minor accidents as well as major ones, so don’t assume that you won’t need to file an accident benefits claim just because you got into a small collision.

Direct compensation coverage

Direct compensation coverage pertains to property damage. This type of coverage will pay for losses relating to a car if it is damaged or lost in an accident that the policyholder was not at fault for. Even though someone else is responsible for the damage to your car, you can still file a direct compensation claim to receive money from your own insurance company. This is the result of Ontario’s no-fault insurance system. Please note that direct compensation coverage may only apply if the accident occurred in Ontario, if it involved at least one other vehicle, and if the other vehicle is insured.

Uninsured automobile coverage

Lastly, uninsured automobile coverage is a type of mandatory coverage that will protect you if you get into an accident that you are not liable for. However, unlike direct compensation or liability coverage, uninsured automobile coverage will only protect you if you are not at fault for the accident and if the accident involved a driver who does not have insurance. In addition to uninsured drivers, uninsured automobile coverage can also be claimed if you get into a collision with an underinsured driver or one who is anonymous because they illegally fled the scene of the accident.

Your auto insurance plan may also include optional coverage

Although the coverages listed below are not mandatory like those listed above, your auto insurance plan may still include them. You will likely get to choose whether to add them to your policy or not. The only exception to this is if you lease or finance your vehicle, in which case your leasing company may require you to add certain additional coverages to your policy:

Collision coverage

Collision car coverage is a type of property damage coverage that can be claimed no matter who is at fault for the accident or not. It can help pay to repair or replace your car if it is lost or damaged in the accident. Collision coverage should have a limit that is similar to the value of your car in the event of a total loss.

Comprehensive coverage

Comprehensive car coverage, which you may hear referred to as parked car coverage, will pay for incidents outside of collisions. For instance, if your car is stolen or damaged by a weather event, comprehensive coverage is what you would claim. Comprehensive insurance only covers the perils listed in your policy. These perils may include theft, vandalism, explosions and riots, fire, falling and flying objects, and natural disasters, among others.

All perils coverage

All perils insurance is also optional and it combines collision and comprehensive coverage into one. It is a popular option for many drivers as it provides them with broad protection. With this coverage, your deductible would be the same no matter if you had glass damage or were involved in a collision. Please note that all perils coverage usually also covers theft by someone who resides in your home or has access to your car, which not all comprehensive policies cover on their own.

Accident forgiveness coverage

One more 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 and eligibility varies by province.

Waiver of depreciation

A waiver of depreciation can pay for you to replace your new car if it is severely damaged in an auto accident and the insurance company deems it a write-off. With a waiver of depreciation, compared to actual cash value coverage, you will receive a larger payout from your insurer to help you cover the cost of buying a new vehicle without the factor of depreciation of your current vehicle.

Loss of use coverage

Loss of use coverage is another optional coverage type that may be included in your auto insurance plan. This will pay for you to rent a car or take other modes of transit, such as taxis, if your car is damaged in an accident and is temporarily unusable. While it is in the shop, your insurer will reimburse you for any transportation expenses incurred during this time. Just make sure that you check your policy and do not exceed your coverage limit.

Other elements that car insurance policies include

A few other elements that car insurance policies contain are listed below. These include limits, deductibles, and premiums. All auto insurance plans will contain each of these components. Limits and deductibles are up to the policyholder to choose while the premium is set by the insurance company:

Coverage limits

First up is coverage limits. Whether you are buying your first car insurance policy or renewing car insurance, you will be able to choose and modify your coverage limits. A coverage limit is the maximum amount of money that your insurance company will pay you for a certain type of claim. For example, your liability coverage limit might be $500,000, which means that this is the maximum amount of money that your insurance company will pay out in the event of a liability claim.

Most customers have the option of choosing what limit they want for each type of coverage added to their policy. The limit options vary, ranging from $200,000 to $2,000,000. Just make sure that you abide by any minimum coverage requirements in your province, such as the mandatory $200,000 in third party liability coverage that is mandated in Ontario. It is worth noting that if you want to increase or decrease your coverage limit down the road, this is one type of change to your car insurance policy that you can make.


Next, policyholders are also able to choose what deductibles they want for their policy. A deductible is the amount of money that the policyholder will pay toward an insured loss before the insurance company issues a payout. In other words, if you experience a loss and file an insurance claim, you will need to pay your deductible amount before you will receive any money from the insurance company. Policyholders typically choose a deductible for each type of coverage on their policy. Deductibles can be low or high, ranging from as low as $500 to as high as $2,000. The lower your deductible, the more your premium will be. In contrast, the higher your deductible, the lower your premium will be.


Lastly, all policies contain premiums. A premium is the amount of money that you are required to pay to the insurance provider in exchange for the coverage that you receive. The insurance company is responsible for calculating a premium for each customer. The customer does not have a say in their premium, though they can take steps to lower the premium, such as by choosing high deductibles, as mentioned above. That said, some of the factors that are considered when an insurance agent calculates a customer’s premium are out of the customer’s control, such as their age. A list of factors that determine car insurance rates is below:

  • Where you live
  • Age
  • Gender
  • Vehicle type
  • How you use your vehicle
  • Driving record
  • Driving experience
  • Past claims
  • Prior insurance coverage
  • Number of kilometers you drive
  • Type of coverage on your policy
  • Your coverage limits
  • Your deductibles

Contact BrokerLink to learn more about what car insurance policies contain

If you want to find out more about how auto insurance policies work and what they contain, contact BrokerLink. We have a team of licensed experts who can help you find a policy that includes everything it needs to and more. We can explain how coverage works and give advice on how to choose the best limits and deductibles for your needs and budgets. We can also give you driving tips, such as how to avoid common car accidents. Get in touch with BrokerLink to begin your auto insurance journey today.

Get an auto insurance quote [phone]